NOTES SECURITIES PURCHASE AGREEMENT
Exhibit
10.2
NOTES SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 31, 2006, by and
among Global Employment Solutions, Inc., a Colorado corporation, with headquarters located at 0000
Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 (the “Company”), and the investors listed
on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. Prior to the Closing (as defined below) and immediately following the consummation of the
Share Exchange (as defined below), the Company will cause PubCo (as defined below) to authorize a
new series of its senior secured convertible notes, which notes shall be convertible into PubCo’s
common stock (the “Common Stock”) in accordance with the terms of such notes.
C. Each Buyer wishes to purchase, and the Company wishes PubCo to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate principal amount of notes, in the form
attached hereto as Exhibit A (as amended or modified from time to time, collectively, the
"Notes”), set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be $30,000,000) and (ii) warrants, in the form attached
hereto as Exhibit B (the “Warrants”), to acquire up to that number of additional shares of
Common Stock set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers (as
exercised, collectively, the “Warrant Shares”).
D. Contemporaneously with the Closing, the Buyers and PubCo will execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit C (as amended or
modified from time to time, the “Registration Rights Agreement”), pursuant to which the Company
agrees to cause PubCo to provide certain registration rights with respect to the shares of Common
Stock into which the Notes are convertible (the “Conversion Shares”) and the Warrant Shares under
the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities
laws.
E. The Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities”.
F. The Notes will be (i) secured by a second priority perfected security interest in all of
the assets of PubCo and the Company and in all of the shares of capital stock and all assets of all
of PubCo’s and the Company’s current and future Subsidiaries (as hereinafter defined), as evidenced
by the Pledge Agreement, in the form attached hereto as Exhibit D, and the Security
Agreement, in the form attached hereto as Exhibit E (as amended or modified from time to
time,
the “Pledge Agreement” and the “Security Agreement”) in favor of Amatis Limited, a company
organized under the laws of the Cayman Islands, in its capacity as Collateral Agent (as defined
below) for the Buyers hereto and for the holders of the Securities, which security interest shall
be senior to all other security interests therein, except those security interests securing the
Senior Indebtedness (as defined in the Notes), and (ii) guaranteed by the Guaranty of all of
PubCo’s and the Company’s current and future Subsidiaries, other than the Inactive Subsidiaries (as
defined below), in the form attached hereto as Exhibit F (each, a “Guaranty,” and together
with the Pledge Agreement and the Security Agreement, as each may amended or modified from time to
time, collectively, the “Security Documents”).
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall cause PubCo to issue and sell to
each Buyer, and each Buyer severally, but not jointly, agrees to purchase from PubCo on the Closing
Date (as defined below), (x) a principal amount of Notes as is set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers and (y) Warrants to acquire up to that number of Warrant
Shares as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (the
"Closing”).
(b) Closing. The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York City time, on a date mutually agreed to by the Company and Buyers holding the right
to purchase not less than 66-2/3% of the aggregate principal amount of the Notes, such Closing Date
to be as soon as practicable following satisfaction (or waiver) of the conditions to the Closing
set forth in Sections 6 and 7 below at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000.
(c) Purchase Price. The aggregate purchase price for the Notes and the Warrants to be
purchased by each Buyer at the Closing (the “Purchase Price”) shall be the amount set forth
opposite such Buyer’s name in column (5) of the Schedule of Buyers. Each Buyer shall pay $1.00 for
each $1.00 of principal amount of Notes and related Warrants to be purchased by such Buyer at the
Closing.
(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price
to PubCo for the Notes and the Warrants to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the Company’s or PubCo’s written wire
instructions, and (ii) the Company shall cause PubCo to deliver to each Buyer (A) the Notes (in the
principal amounts as such Buyer shall request) which such Buyer is then purchasing and (B) the
Warrants (in the amounts as such Buyer shall request) which such Buyer is purchasing, in each case
duly executed on behalf of PubCo and registered in the name of such Buyer or its designee.
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2. BUYER’S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Notes and the
Warrants and (ii) upon conversion of the Notes and exercise of the Warrants will acquire the
Conversion Shares and the Warrant Shares (less any Warrant Shares forfeited in a Cashless Exercise
(as defined in the Warrants)), in each case, for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
(b) Accredited Investor Status. Such Buyer is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as will be provided in the
Registration Rights Agreement: (I) the Securities have not been and are not being
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registered under the 1933 Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to PubCo an opinion, in generally acceptable form, of counsel selected by the Buyer
and reasonably satisfactory to PubCo, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides PubCo with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a
successor rule thereto) (collectively, “Rule 144”); (II) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which the seller (or the
Person (as defined in Section 3(o)) through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (III) none of
the Company, PubCo or any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions of any exemption
thereunder.
(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Notes and Warrants and, until such time as the resale of the Conversion Shares and
the Warrant Shares have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Conversion Shares and the Warrant Shares,
except as set forth below, shall bear any legend that is required by the “blue sky” laws of any
state and a restrictive legend in substantially the following form (and a stop-transfer order may
be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]
[EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER AND
REASONABLY ACCEPTABLE TO THE ISSUER, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY THE
HOLDER OF THIS NOTE
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IN FAVOR OF XXXXX FARGO BANK, NATIONAL ASSOCIATION, ACTING THROUGH ITS XXXXX
FARGO BUSINESS CREDIT OPERATING DIVISION, DATED AS OF MARCH 31, 2006.
The legend set forth above shall be removed and PubCo shall issue a certificate without such legend
to the holder of the Securities upon which it is stamped, if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides PubCo with an opinion of
counsel reasonably acceptable to PubCo, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration under the
applicable requirements of the 1933 Act, or (iii) such holder provides PubCo with reasonable
assurances of the holder’s belief that the Securities can be sold, assigned or transferred pursuant
to Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement has been, and when the other Transaction
Documents (as defined below) to which such Buyer is a party are executed and delivered in
accordance with the terms and conditions contemplated hereby and thereby, such documents shall have
been, duly and validly authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
(i) Residency. Such Buyer is a resident of the jurisdiction specified below its
address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. The Company and its “Subsidiaries” (which for
purposes of this Agreement means any entity in which the Company and/or after the Closing, PubCo,
directly or indirectly, owns capital stock or holds an equity or similar interest) are entities
duly organized and validly existing in good standing under the laws of the jurisdiction in which
they are formed, and have the requisite power and authority to own their properties and to carry on
their business as now being conducted. As of the Closing Date, neither PD Quick — Temps, Inc., a
Pennsylvania corporation, nor Placer Staffing, Inc., a California corporation, (each an “Inactive
Subsidiary”) owns or possesses any property or assets or conducts any business or operations. Each
of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in
good standing in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not reasonably be expected to have a Material
Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse
effect on the business, properties, assets, operations, results of operations, condition (financial
or otherwise) or prospects of the Company
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and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby and the
other Transaction Documents (as defined below) or by the agreements and instruments to be entered
into in connection herewith or therewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents to which it is a party. The Company has no
Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the requisite power and
authority to enter into and perform its obligations under this Agreement, the Guaranty to which it
is a party and each of the other agreements entered into by the parties hereto in connection with
the transactions contemplated by this Agreement to which the Company is a party (such documents,
and together with the Notes, the Warrants, the Registration Rights Agreement, the Security
Documents, the Irrevocable Transfer Agent Instructions, the Subordination Agreement (as defined in
Section 7(l) below), and each of the other agreements to be entered into in connection with the
transactions contemplated by this Agreement, collectively, the “Transaction Documents”). The
execution and delivery of the Transaction Documents to which the Company is a party and the
consummation by the Company of the transactions contemplated hereby and thereby have been duly
authorized by the Company’s Board of Directors and no further filing, consent, or authorization is
required by the Company, its Board of Directors or its stockholders. This Agreement and the other
Transaction Documents to which the Company is a party have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, liquidation or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and remedies.
(c) Offer of Securities. The offer by the Company of the Securities is exempt from
registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which the Company is a party and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) result in a violation of any certificate of
incorporation, certificate of formation, any certificate of designations or other constituent
documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its
Subsidiaries, or the bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected.
(e) Consents. The Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental agency or any regulatory
or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents to which
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it is a party, in each case in accordance with the terms hereof or thereof, other than (i) the
filing of appropriate UCC financing statements with the appropriate states and other authorities
pursuant to the Pledge Agreement and the Security Agreement, and (ii) the current report on Form
8-K required to be filed after Closing by PubCo pursuant to Section 4(h) of this Agreement, the
Form D filing required to be made following the Closing by PubCo with the SEC and the registration
statement and related state securities law filings required by the Registration Rights Agreement.
(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby and thereby and that
no Buyer is (i) an officer or director of the Company, (ii) an “affiliate” of the Company (as
defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more than
10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect
to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s
purchase of the Securities. The Company further represents to each Buyer that the decision of the
Company and each of the Subsidiaries to enter into the Transaction Documents, as applicable, has
been based solely on the independent evaluation by the Company, its Subsidiaries and their
representatives.
(g) No General Solicitation; Placement Agent’s Fees. None of the Company, any of its
affiliates, or any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by
any Buyer or its investment advisor) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim. The Company acknowledges that it has engaged Xxxxxx & Xxxxxxx, LLC
as placement agent (the “Agent”) in connection with the sale of the Securities. The Company will
also pay a fee of up to $810,000 to Xxxxx Xxxxxx & Co. (“Xxxxxx”) contemporaneously with the
Closing. Other than the Agent and Xxxxxx, the Company has not engaged any placement agent or other
agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries, any of their
affiliates, or any Person acting on their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under circumstances that would
require registration of any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the securities of the
Company are listed or designated.
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(i) Financial Statements. The financial statements of the Company have been prepared
in accordance with United States generally accepted accounting principles consistently applied
(“GAAP”), during the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except for liabilities and obligations incurred
in the ordinary course of business and consistent with past practice, liabilities and obligations
reflected on or reserved against in the January 1, 2006 audited balance sheet prepared in
accordance with GAAP delivered pursuant to Section 7(o) (the “Balance Sheet”) and as otherwise
disclosed herein or in the disclosure schedules to this Agreement (the “Disclosure Schedules”),
since January 2, 2006, inclusive of such date, the Company has not incurred any liabilities or
obligations that would be required to be reflected or reserved against in a balance sheet of the
Company prepared in accordance with the principles used in preparation of the Balance Sheet.
(j) Absence of Certain Changes. Since January 1, 2006, there has been no change or
development in the business, properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries that has had or could reasonably be
expected to have a Material Adverse Effect. Since January 1, 2006, the Company has not (i)
declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $100,000 outside of the ordinary course of business, (iii) had capital expenditures,
individually or in the aggregate, in excess of $500,000 or (iv) waived any material rights with
respect to any Indebtedness or other rights in excess of $100,000 owed to it. The Company has not
taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company is not as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing will not be, Insolvent (as defined below). For purposes of this
Section 3(j), “Insolvent” means (i) the present fair saleable value of the Company’s assets is less
than the amount required to pay the Company’s total Indebtedness (as defined in Section 3(o)), (ii)
the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as such debts mature or
(iv) the Company has unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.
(k) Conduct of Business; Regulatory Permits. Neither the Company nor its Subsidiaries
is in violation of any term of or in default under its certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents or its bylaws. Neither
the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, except for
possible violations which would not, individually or in the aggregate, have a Material Adverse
Effect. The Company and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct
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their respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a Material Adverse
Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.
(l) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor
any director, officer, agent, employee or other Person acting on behalf of the Company or any of
its Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii) violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
(m) Transactions With Affiliates. Except as set forth in Schedule 3(m)
hereto, other than the issuance of restricted stock disclosed on Schedule 3(n), none of the
officers, directors or employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such officer, director,
or employee has a substantial interest or is an officer, director, trustee or partner.
(n) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (i) 10,000,000 shares of common stock, $.01 par value, 2,693,370 of which are
issued and outstanding and (ii) 50,000,000 shares of preferred stock, $.01 par value, of which
7,000,000 shares have been designated as Series C Preferred Stock, 6,825,780 of which are issued
and outstanding, and 30,000,000 have been designated as Series D Preferred Stock, 21,841,930.34 of
which are issued and outstanding. All of such outstanding shares have been, or upon issuance will
be, validly issued and are fully paid and nonassessable. Except as disclosed in Schedule
3(n) or Schedule 3(o): (i) none of the Company’s share capital is subject to
preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights convertible into,
or exercisable or exchangeable for, any share capital of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional share capital of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any share capital of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness (as defined in Section 3(o)) of the Company or any
of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv)
there are no financing statements securing obligations in any material
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amounts, either singly or in the aggregate, filed in connection with the Company; (v) there
are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated
to register the sale of any of their securities under the 1933 Act (except the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or
may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no
securities or instruments containing anti-dilution or similar provisions that will be triggered by
the issuance of the Securities; (viii) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; (ix) all the Company’s
outstanding options and warrants shall be cancelled at Closing; and (x) no securities of the
Company or PubCo are listed or quoted on any stock exchange or automated quotation system.
Immediately after giving effect to the Merger and the Share Exchange (as such terms are defined in
Section 7(p) hereof), (i) all of the Company’s issued and outstanding stock shall be owned by PubCo
and (ii) all other securities issued by the Company (including, without limitation, the Series C
Preferred Stock, the Series D Preferred Stock and any securities disclosed in Schedule
3(n)) shall have been exchanged for shares of PubCo’s Class A Common Stock (the “Class A Common
Stock”), PubCo’s Class B Common Stock (the “Class B Common Stock”) or PubCo’s Common Stock, as
applicable. The Company has furnished to the Buyer true, correct and complete copies of the
Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation”), the Company’s Bylaws, as amended and as in effect on the date
hereof (the “Bylaws”), and all agreements relating to securities convertible into, or exercisable
or exchangeable for, shares of Common Stock and the material rights of the holders thereof in
respect thereto.
(o) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(o),
neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined
below), (ii) is a party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or instrument would result
in a Material Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv)
is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse
Effect. Schedule 3(o) provides a detailed description of the material terms of any such
outstanding Indebtedness. Immediately after giving effect to the Merger and the Share Exchange (as
such terms are defined in Section 7(p) hereof), neither the Company nor PubCo shall have any
outstanding Indebtedness, other than the Notes, the Senior Indebtedness (as defined in the Notes)
and the Permitted Indebtedness (as defined in the Notes) set forth on Schedule 3(o)(i).
For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A)
all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services including, without limitation, “capital leases” in
accordance with U.S. GAAP (other than trade payables entered into in the ordinary course of
business), (C) all reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under any
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conditional sale or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary obligations under any leasing
or similar arrangement which, in connection with U.S. GAAP, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and contract rights) owned
by any Person, even though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.
(p) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation that is material, individually or in the aggregate, before or by, any court, public
board, government agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, the Common Stock or any of the Company’s
Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors.
(q) Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
(r) Employee Relations.
(i) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries believe that their
relations with their employees are good. None of Xxxxxx Xxxxx, Xxx Xxxxxxxxxx, Xxxxxx Xxxxxx,
Xxxxx Xxxxxxxxxx or any officer in the capacity of President-Professional Staffing or any other
person holding a similar office or holding an office at a similar level as the foregoing (the
“Executive Officers”) have notified the Company that such officer
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intends to leave the Company or otherwise terminate such officer’s employment with the
Company. No Executive Officer of the Company, to the knowledge of the Company, is, or is expected
to be, in violation of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each Executive Officer does not subject
the Company or any of its Subsidiaries to any liability with respect to any of the foregoing
matters.
(ii) The Company and its Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(s) Title. The Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each case free and clear
of all liens, encumbrances and defects except for the blanket lien securing the Senior Indebtedness
(as defined in the Notes) and such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(t) Intellectual Property Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, service marks, and all applications and
registrations therefor, trade names, patents, patent rights, copyrights, original works of
authorship, inventions, licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted. None of the Company’s Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the Company or its
Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being threatened, against the Company or
its Subsidiaries regarding its Intellectual Property Rights. The Company is unaware of any facts
or circumstances which might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property Rights.
(u) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all applicable Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions of any such permit,
license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have,
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individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved thereunder.
(v) Subsidiary Rights. Except as set forth in Schedule 3(v), the Company or
one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or each Subsidiary.
(w) Tax Status. The Company and each of its Subsidiaries (i) has made or filed all
foreign, federal and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. No liens have been filed and no claims are being
asserted by or against the Company or any of its Subsidiaries with respect to any taxes (other than
liens for taxes not yet due and payable). Neither the Company nor it Subsidiaries has received
notice of assessment or proposed assessment of any taxes claimed to be owed by it or any other
Person on its behalf. Except as disclosed on Schedule 3(w), neither the Company nor any
Subsidiary is a party to any tax sharing or tax indemnity agreement or any other agreement of a
similar nature that remains in effect. Each of the Company and its Subsidiaries has complied in
all material respects with all applicable legal requirements relating to the payment and
withholding of taxes and, within the time and in the manner prescribed by law, has withheld from
wages, fees and other payments and paid over to the proper governmental or regulatory authorities
all amounts required.
(x) Internal Accounting Controls. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in conformity
with U.S. GAAP and to maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference.
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(y) Ranking of Guaranty. Except for the Senior Indebtedness (as defined in the
Notes), no Indebtedness of the Company or any of its Subsidiaries, at the Closing, will be senior
to or pari passu with the Guaranty by the Company in right of payment, whether with respect of
payment or redemptions, interest, damages or upon liquidation or dissolution or otherwise,
excluding (i) the obligations of the Company or its Subsidiaries under any lease of real or
personal property by such Person as lessee which is required under GAAP to be capitalized on such
Person’s balance sheet and (ii) Indebtedness permitted by clause (v) of the definition of
“Permitted Lien” set forth in the Notes.
(z) Lien Searches. Within 6 Business Days prior to the date hereof, the Company shall
have delivered or caused to be delivered to each Buyer certified copies of UCC financing statement
search results listing any and all effective financing statements filed within five years prior to
such date in any applicable jurisdiction that name the Company or any of their Subsidiaries as a
debtor to perfect an interest in any of the assets thereof, together with copies of such financing
statements, none of which financing statements, except for any financing statements filed with
respect to the Senior Indebtedness and as otherwise agreed to in writing by the Buyers, shall cover
any of the “Collateral” (as defined in the Security Documents), and the results of searches for any
effective tax liens and judgment liens filed against any such Person or its property in any
applicable jurisdiction, which results, except as otherwise agreed to in writing by the Buyers,
shall not show any such effective tax liens and judgment liens.
(aa) Required Repayments; Management Payments. Upon the payment of cash and shares of
Common Stock in the amounts set forth on Schedule 3(aa)(i) (the “Required Repayments”) to
the holders of the Indebtedness identified as “Subordinated Indebtedness” on Schedule 3(o),
the Company shall have fulfilled any and all of its obligations to the holders of the Indebtedness
identified as “Subordinated Indebtedness” on Schedule 3(o) arising from, under or with
respect to the Master Investment Agreement, dated as of November 15, 2001, by and among the
Company, Global Investment I, LLC and the other parties identified therein, as currently in effect
(the “Master Investment Agreement”). Upon the payment of the cash and shares of Common Stock to
the parties and in the amounts set forth on Schedule 3(aa)(ii) (collectively, the
“Management Payments”), the Company shall have fulfilled any and all of its obligations to such
parties arising from, under or with respect to (i) the Certificate of Incorporation, (ii) the
Company’s Series C Preferred Stock, (iii) the Company’s Series D Preferred Stock, (iv) the
Company’s Restricted Stock Plan, as currently in effect, and (v) the Master Investment Agreement,
as applicable.
(bb) Disclosure. All disclosure, oral or written, provided to the Buyers regarding
the Company, its business and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company, taken as a whole, is true and correct and does
not contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances under which they were
made, not misleading.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement.
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(b) Form D and Blue Sky. The Company agrees to cause PubCo to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such
action, or cause PubCo to take such action, as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Securities for sale to the Buyers at the
Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of
the United States (or to obtain an exemption from such qualification), and shall provide evidence
of any such action so taken to the Buyers on or prior to the Closing Date.
(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Conversion Shares and Warrant Shares and
none of the Notes or Warrants is outstanding (the “Reporting Period”), the Company shall cause
PubCo to use every reasonable effort to timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not permit PubCo to terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
(d) Financial Information. (i) The Company agrees to cause PubCo to send the
following to each Investor during the Reporting Period unless the following are filed with the SEC
through XXXXX and are available to the public through the XXXXX system, within one Business Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K or 10-KSB, any
interim reports or any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements for any period other than annual, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, (ii) on the same day as the release thereof, facsimile copies of all press releases
issued by PubCo, the Company or any of its Subsidiaries, and (iii) copies of any notices and other
information made available or given to the stockholders of PubCo or the Company generally,
contemporaneously with the making available or giving thereof to the stockholders.
(e) Until the Closing, the Company agrees to promptly deliver to each Buyer a copy of all
financial statements prepared by the Company for distribution to any of the Company’s shareholders,
lenders or its board of directors.
(f) Fees. The Company and PubCo shall reimburse Amatis Limited (a Buyer) or its
designee(s) for all reasonable costs and expenses (in addition to any amounts previously paid)
incurred in connection with the transactions contemplated by the Transaction Documents (including
all reasonable legal fees and disbursements in connection therewith, documentation and
implementation of the transactions contemplated by the Transaction Documents and due diligence in
connection therewith), which amount may be, at the sole option of Amatis Limited, after application
of the $50,000 advance toward such fees and expenses paid by the Company, withheld by such Buyer
from its Purchase Price at the Closing. The Company and PubCo, as applicable, shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, or broker’s commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions payable to the Agent.
The Company shall pay, or cause PubCo to pay, and hold, or cause PubCo to hold, each Buyer harmless
against, any liability, loss or expense (including,
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without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment. Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses in connection with
the sale of the Securities to the Buyers.
(g) Pledge of Securities. The Company, on behalf of itself and PubCo, acknowledges
and agrees that the Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or financing arrangement
that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities
shall be required to provide the Company or PubCo with any notice thereof or otherwise make any
delivery to the Company or PubCo pursuant to this Agreement or any other Transaction Document,
including, without limitation, Section 2(f) hereof; provided that an Investor and its pledgee shall
be required to comply with the provisions of Section 2(f) hereof in order to effect a sale,
transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and
deliver, and to cause PubCo to execute and deliver, such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the Securities to such pledgee by
an Investor.
(h) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York Time, on the first Business Day following the Closing Date, the Company shall cause
PubCo to file a press release (the “Press Release”) describing the material terms of the
transactions contemplated by the Transaction Documents. On or before 8:30 a.m., New York Time, on
the second Business Day following the Closing Date, the Company shall cause PubCo to file a Current
Report on Form 8-K, describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this Agreement), the form of
each of the Notes, the form of Warrant, the Registration Rights Agreement and the Security
Documents) as exhibits to such filing (including all attachments, the “8-K Filing”). From and
after the issuance of the Press Release, no Buyer shall be in possession of any material, nonpublic
information received from the Company, PubCo, any of its Subsidiaries or any of their respective
officers, directors, employees or agents, that is not disclosed in the Press Release. The Company
shall not, and shall cause PubCo and each of their Subsidiaries and their and each of their
respective officers, directors, employees and agents, not to, provide any Buyer with any material,
nonpublic information regarding the Company, PubCo or any of their Subsidiaries from and after the
issuance of the Press Release without the express written consent of such Buyer. In the event of a
breach of the foregoing covenant by the Company, any of their Subsidiaries, or any of their
respective officers, directors, employees and agents, in addition to any other remedy provided
herein or in the Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, their Subsidiaries, or any of their
respective officers, directors, employees or agents. No Buyer shall have any liability to the
Company, PubCo, its Subsidiaries, or any of their respective officers, directors, employees,
stockholders or agents for any such disclosure. Subject to the foregoing, neither the Company,
PubCo, nor any Buyer shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that PubCo shall be
entitled, without the prior approval of any Buyer, to
- 16 -
make any press release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required
by applicable law and regulations (provided that in the case of clause (i) the holders of 66 2/3%
of the outstanding principal amount of the Notes shall be consulted by PubCo in connection with and
given an opportunity to review and comment on any such press release or other public disclosure
prior to its release). Notwithstanding the foregoing, neither PubCo nor the Company shall publicly
disclose the name of any Buyer, or include the name of any Buyer in any filing with the SEC or any
regulatory agency or Principal Market, the stock exchange or automated quotation system upon which
PubCo’s shares of Common Stock are traded, including, without limitation, any and all discounted
issuance rules, if applicable, without the prior written consent of such Buyer, except (i) for
disclosure thereof in the 8-K Filing or Registration Statement or (ii) as required by law or
Principal Market regulations, the regulations of the stock exchange or automatic quotation system
upon which PubCo’s shares of Common Stock are then traded or any order of any court or other
governmental agency, in which case PubCo shall provide such Buyer with prior notice of such
disclosure and the opportunity to review and comment on such disclosure.
(i) Special Dividend; Restriction on Redemption and Other Cash Dividends. Immediately
after giving effect to the Merger and the Share Exchange (as such terms are defined in Section 7(p)
hereof), PubCo shall declare and pay an aggregate cash dividend of not more than $25.58528 per
share on its outstanding Class A Common Stock (the “Class A Dividend”) and an aggregate cash
dividend of not more than $3.21374 per share on its outstanding Class B Common Stock (the “Class B
Dividend,” and collectively with the Class A Dividend, the “Special Dividend”). Immediately
following the payment of the Special Dividend, each share of Class A Common Stock and each share of
Class B Common Stock shall, automatically and without further action by the Company, PubCo or any
other party, convert into one share of Common Stock (such conversions, the “Required Conversions”).
So long as any Notes are outstanding, the Company shall cause PubCo not to, directly or
indirectly, redeem, or declare or pay any cash dividend or distribution on, the Common Stock
without the prior express written consent of the holders of Notes representing not less than
66-2/3% of the aggregate principal amount of the then outstanding Notes; provided that the
foregoing shall not prohibit the payment of the Special Dividend as contemplated hereby.
(j) Additional Notes; Variable Securities; Dilutive Issuances. For so long as any
Buyer beneficially owns any Securities, the Company shall cause PubCo not to issue any Notes other
than to the Buyers as contemplated hereby and the Company shall cause PubCo not to issue any other
securities that would cause a breach or default under the Notes. For so long as any Notes or
Warrants remain outstanding, the Company shall cause PubCo not to, in any manner, issue or sell any
rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly
convertible into or exchangeable or exercisable for Common Stock at a price which varies or may
vary with the market price of the Common Stock, including by way of one or more reset(s) to any
fixed price unless the conversion, exchange or exercise price of any such security cannot be less
than the then applicable Conversion Price (as defined in the Notes) with respect to the Common
Stock into which any Note is convertible or the then applicable Exercise Price (as defined in the
Warrants) with respect to the Common Stock into which any Warrant is exercisable. For so long as
any Notes or Warrants remain outstanding, the Company shall cause PubCo not to, in any manner,
enter into or affect any Dilutive Issuance (as defined in
- 17 -
the Notes) if the effect of such Dilutive Issuance is to cause PubCo to be required to issue
upon conversion of any Note or exercise of any Warrant any shares of Common Stock in excess of that
number of shares of Common Stock which PubCo may issue upon conversion of the Notes and exercise of
the Warrants without breaching PubCo’s obligations under the rules or regulations of the National
Association of Securities Dealers, Inc.’s OTC Bulletin Board (the “Principal Market”) or the stock
exchange or automated quotation system upon which PubCo’s shares of Common Stock are traded,
including, without limitation, any and all discounted issuance rules, if applicable.
(k) Corporate Existence. So long as any Buyer beneficially owns any Securities, the
Company shall cause PubCo not to be party to any Fundamental Transaction (as defined in the Notes)
unless PubCo is in compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes and the Warrants.
(l) Reservation of Shares. The Company shall cause PubCo to take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after the Closing Date,
130% of the number of shares of Common Stock issuable upon conversion of all of the Notes and upon
exercise of the Warrants.
(m) Conduct of Business. The business of PubCo, the Company and their Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any governmental entity,
except where such violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.
(n) Additional Issuances of Securities.
(i) For purposes of this Section 4(n), the following definitions shall apply.
(A) “Convertible Securities” means any stock or securities (other than Options) convertible
into or exercisable or exchangeable for shares of Common Stock.
(B) “Options” means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.
(C) “Common Stock Equivalents” means, collectively, Options and Convertible Securities.
(ii) From the date hereof until the date that is 180 Trading Days (as defined in the Notes)
following the Effective Date (as defined in the Registration Rights Agreement), as such date may be
extended by one Trading Day for each Trading Day following the Effective Date on which the Equity
Conditions (as defined in the Notes) are not satisfied (the “Trigger Date”), neither PubCo nor the
Company will, directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of)
any of its or its Subsidiaries’ equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at any time during
its life and under any circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale,
- 18 -
grant, disposition or announcement being referred to as a “Subsequent Placement”) without the
prior written approval of the holders of 66-2/3% of the aggregate principal amount of the Notes.
(iii) From the Trigger Date until the two year anniversary of the Closing Date, the Company
shall cause PubCo not to, directly or indirectly, effect any Subsequent Placement unless PubCo
shall have first complied with this Section 4(n)(iii).
(A) PubCo shall deliver to each Buyer a written notice (the “Offer Notice”) of any proposed or
intended issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered
Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold
or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the persons or entities (if known) to which or with which the Offered Securities are
to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such
Buyers a pro rata portion of 50% of the Offered Securities (a) based on such Buyer’s pro rata
portion of the aggregate principal amount of Notes purchased hereunder (the “Basic Amount”), and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Buyers as such Buyer shall
indicate it will purchase or acquire should the other Buyers subscribe for less than their Basic
Amounts (the “Undersubscription Amount”).
(B) To accept an Offer, in whole or in part, such Buyer must deliver a written notice to PubCo
prior to the end of the 10th Business Day after such Buyer’s receipt of the Offer Notice
(the “Offer Period”), setting forth the portion of such Buyer’s Basic Amount that such Buyer elects
to purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice
of Acceptance”). If the Basic Amounts subscribed for by all Buyers are less than the total of all
of the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount in its Notice
of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Buyer
who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to rounding
by PubCo to the extent its deems reasonably necessary, which process shall be repeated until the
Buyers shall have had the opportunity to subscribe for any remaining Undersubscription Amount.
(C) PubCo shall have 10 Business Days from the expiration of the Offer Period above to offer,
issue, sell or exchange all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the “Refused Securities”), but only to the offerees
described in the Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not more favorable to the
acquiring person or persons or less favorable to PubCo than those set forth in the Offer Notice.
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(D) In the event PubCo shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4(n)(iii) above), then each Buyer
may, at its sole option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section
4(n)(iii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount
of Offered Securities PubCo actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section 4(n)(iii) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, PubCo may not issue, sell or exchange more than
the reduced number or amount of the Offered Securities unless and until such securities have again
been offered to the Buyers in accordance with Section 4(n)(iii) above.
(E) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from PubCo, and PubCo shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section
4(n)(iii) above if the Buyers have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Buyers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by PubCo and the Buyers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the Buyers and their
respective counsel.
(F) Any Offered Securities not acquired by the Buyers or other persons in accordance with
Section 4(n)(iii) above may not be issued, sold or exchanged until they are again offered to the
Buyers under the procedures specified in this Agreement.
(iv) The restrictions contained in subsections (ii) and (iii) of this Section 4(n) shall not
apply in connection with the issuance of any Excluded Securities (as defined in the Notes) or any
bona fide firm commitment underwritten public offering with a nationally recognized underwriter
pursuant to an effective registration statement under the 1933 Act that generates net proceeds to
the Company or PubCo, as applicable, of at least $30 million (other than an “at the-market
offering” as defined in Rule 415(a)(4) under the 1933 Act and “equity lines”).
(o) Integration. None of PubCo, the Company, their Subsidiaries, their affiliates and
any Person acting on their behalf will take any action or steps referred to in Section 3(h) that
would require registration of any of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
(p) Appointment of Collateral Agent. Amatis Limited (the “Collateral Agent”) is
hereby appointed as the collateral agent for the Buyers hereunder, and each Buyer hereby authorizes
the Collateral Agent (and its officers, directors, employees and agents) to take any and all such
actions on behalf of the Buyers with respect to the Collateral (as defined in the Security
Documents) and the Obligations in accordance with the terms of this Agreement. The Collateral
Agent shall not have, by reason hereof or any of the other Transaction Documents, a fiduciary
relationship in respect of any Buyer. Neither the Collateral Agent nor any of its
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officers, directors, employees and agents shall have any liability to any Buyer for any action
taken or omitted to be taken in connection hereof except to the extent caused by its own gross
negligence or willful misconduct, and each Buyer agrees to defend, protect, indemnify and hold
harmless the Collateral Agent and all of its officers, directors, employees and agents
(collectively, the “Indemnitees”) from and against any losses, damages, liabilities, obligations,
penalties, actions, judgments, suits, fees, costs and expenses (including, without limitation,
reasonable attorneys’ fees, costs and expenses) incurred by such Indemnitee, whether direct,
indirect or consequential, arising from or in connection with the performance by such Indemnitee of
the duties and obligations of Collateral Agent pursuant hereto.
(q) Holding Period. For the purposes of Rule 144, the Company acknowledges, on behalf
of itself and PubCo, based on current securities laws, that the holding period of the Conversion
Shares may be tacked onto the holding period of the Notes and the holding period of the Warrant
Shares may be tacked onto the holding period of the Warrants (in the case of Cashless Exercise (as
defined in the Warrants)) and the Company, on behalf of itself and PubCo, agrees not to take a
position contrary to this Section 4(q).
(r) OTC Bulletin Board. The Company shall cause PubCo to use best efforts and to
cooperate in Xxxxxx & Xxxxxxx, LLC’s application to cause the Common Stock to become designated for
quotation on the Principal Market as soon as practicable following the Closing Date and thereafter
to comply with the rules of the Principal Market. If the Common Stock is not designated for
quotation on the Principal Market by the 10th Business Day after the earlier to occur of
the Effective Date (as defined in the Registration Rights Agreement) or the applicable
Effectiveness Deadline (as defined in the Registration Rights Agreement) (such date, the “OTC
Deadline”), then, as partial relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company shall pay to each
Investor (as such term is defined in the Registration Rights Agreement) an amount in cash equal to
(i) 1.0% of the aggregate Purchase Price of such Investor’s Notes on the day of the OTC Deadline
and (ii) 2.0% of the aggregate Purchase Price of such Buyer’s Notes on every 30th day after the day
of the OTC Deadline (prorated for periods totaling less than 30 days) until the Common Stock is
designated for quotation on the Principal Market. The payments to which an Investor shall be
entitled pursuant to this Section 4(r) are referred to herein as “OTC Delay Payments”. OTC Delay
Payments shall be paid on the earlier of (x) the dates set forth above and (y) the third Business
Day after the first day that the Common Stock is designated for quotation on the Principal Market.
In the event the Company fails to make OTC Delay Payments in a timely manner, such OTC Delay
Payments shall bear interest at the rate of 2.0% per month (prorated for partial months) until paid
in full. Notwithstanding anything herein or in the Registration Rights Agreement to the contrary,
(i) no OTC Delay Payments shall be due and payable with respect to the Warrants or the Warrant
Shares and (ii) in no event shall the aggregate amount of OTC Delay Payments payable to any
Investor, together with any Registration Delay Payments (as defined in the Registration Rights
Agreement) payable to such Investor, in each case that are outside of the control of the Company or
PubCo, exceed, in the aggregate, 10% of the aggregate Purchase Price of such Investor’s Notes.
(s) Guaranty. On or prior to the Closing, the Company and each Subsidiary shall
execute a Guaranty in the form attached hereto as Exhibit F (a “Guaranty”) and
shall
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execute and deliver the Pledge Agreement and the Security Agreement, in the form attached
hereto as Exhibit D and Exhibit E, respectively. In addition, if PubCo, the
Company or any other Grantor (as defined in the Pledge Agreement and the Security Agreement) shall
hereafter own, create or acquire any other Subsidiary that is not a Grantor hereunder or a party to
a Guaranty, then the Company, PubCo or such other Grantor shall promptly notify the Collateral
Agent thereof and PubCo, the Company or such other such Grantor shall cause such Subsidiary to
become a party to a Guaranty and a party to the Pledge Agreement and the Security Agreement and to
duly execute and/or deliver such opinions of counsel and other documents, in form and substance
reasonably acceptable to the Collateral Agent or as the Collateral Agent shall reasonably request
with respect thereto.
(t) Required Repayments; Management Payments. Contemporaneously with the Closing, the
Company or its agent shall make the Required Repayments and the Management Payments; provided,
however, (i) that prior to making any Required Repayment, the Company shall have received from the
holders of the Indebtedness identified as “Subordinated Indebtedness” on Schedule 3(o) a
written statement acknowledging that upon payment by the Company of the Required Repayments, all of
such Indebtedness shall be satisfied and cancelled; and (ii) that prior to making any Management
Payment, the Company or its agent shall have received a letter of transmittal from each intended
recipient of such Management Payment acknowledging that such Management Payment satisfies all of
the Company’s obligations to such recipient under (A) the Certificate of Incorporation, (B) the
Company’s Series C Preferred Stock, (C) the Company’s Series D Preferred Stock, (D) the Company’s
Restricted Stock Plan, as in effect on the date hereof, and (E) the Master Investment Agreement,
and, in each case, releasing the Company from any and all further obligations arising from, under
or with respect thereto.
(u) As soon as practicable after Closing, but in no event later than 10 days after the
Closing, the Company shall cause PubCo and its Subsidiaries, as applicable, to deliver to the
Collateral Agent duly executed assignments for security with respect to all of the Intellectual
Property owned by PubCo and its Subsidiaries.
(v) As soon as practicable, but in no event later than May 31, 2006, the Company shall deliver
to the Collateral Agent evidence satisfactory to the Collateral Agent in its sole discretion that
UCC-1 Financing Statement No. 2006011902869, filed in the Pennsylvania Secretary of State’s Office
on January 19, 2006, naming Main Line Personnel Service, Inc., as debtor, and General Electric
Capital Corporation, as secured party, has been terminated.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall cause PubCo to maintain at its principal executive
offices (or such other office or agency of PubCo as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants, in which PubCo shall record the name and
address of the Person in whose name the Notes and the Warrants and have been issued (including the
name and address of each transferee), the principal amount of Notes held by such Person, the number
of Conversion Shares issuable upon conversion of the Notes and Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall cause PubCo to keep the register
open and available at all times during business hours for inspection of any Buyer or its legal
representatives.
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(b) Transfer Agent Instructions. The Company shall cause PubCo to issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, which legend removal
instructions shall be consistent with Section 2(g) hereof and shall instruct such transfer agent to
issue certificates or credit shares to the applicable balance accounts at The Depository Trust
Company (“DTC”), registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares issued at the Closing or upon conversion of the Notes or
exercise of the Warrants in such amounts as specified from time to time by each Buyer to PubCo upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit G attached
hereto (the “Irrevocable Transfer Agent Instructions”). If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f) hereof, the Company shall cause PubCo to
permit the transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or assignment. The Company
acknowledges, on behalf of itself and PubCo, that a breach by it of its obligations hereunder will
cause irreparable harm to a Buyer. Accordingly, the Company acknowledges, on behalf of itself and
PubCo, that the remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the Company or PubCo of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
The obligation of the Company and PubCo hereunder to issue and sell the Notes and the related
Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are for the Company’s and
PubCo’s benefit and may be waived by the Company or PubCo at any time in their discretion by
providing each Buyer with prior written notice thereof:
(a) Such Buyer shall have executed each of the Transaction Documents to which it is a party
and delivered the same to the Company.
(b) Such Buyer and each other Buyer shall have delivered to the Company the Purchase Price
(less, in the case of Amatis Limited, the amounts withheld pursuant to Section 4(f) of this
Agreement) for the Notes and the related Warrants being purchased by such Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire instructions provided by the
Company.
(c) The representations and warranties of such Buyer shall be true and correct in all material
respects (except for those representations and warranties that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all respects) as of the date when made
and as of the Closing Date as though made at that time (except for representations and warranties
that speak as of a specific date), and such Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by such Buyer at or prior to the Closing Date.
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7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Notes and the related Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company or PubCo with prior written
notice thereof:
(a) Each of the Company, PubCo and each of their Subsidiaries, to the extent each is a party
thereto, shall have executed and delivered to such Buyer (i) each of the Transaction Documents,
(ii) the Notes (in such principal amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement and (iii) the Warrants (in such amounts as such
Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement.
(b) PubCo shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit G attached hereto, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.
(c) Such Buyer shall have received the opinion of Xxxxxxxxxx Hyatt & Xxxxxx, P.C. (“BHF”),
PubCo’s and the Company’s outside counsel, dated as of the Closing Date, in the form of Exhibit
H attached hereto.
(d) The Company and PubCo shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company, PubCo and each of their Subsidiaries in such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within 10 days of the Closing Date.
(e) The Company and PubCo shall have delivered to such Buyer a certificate evidencing the
Company’s and PubCo’s qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the Company and PubCo,
conducts business, as of a date within 10 days of the Closing Date.
(f) PubCo shall have filed the Certificate of Designations, Preferences and Rights of
PubCo’s Series A Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary
of State of the State of Delaware and such Certificate of Designation shall continue to be in full
force and effect as of the Closing Date. The Company and PubCo shall have delivered to such
Buyer a certified copy of the Certificate of Incorporation and the certificate of incorporation of
PubCo, as amended by the Certificate of Designation, as certified by the Secretary of State of the
State of Colorado and Delaware, respectively, within 10 days of the Closing Date.
(g) The Company shall have delivered to such Buyer a certificate, executed by the Secretary of
the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section
3(b) hereof as adopted by the Company’s Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the
Closing, in the form attached hereto as Exhibit I.
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(h) The representations and warranties of the Company shall be true and correct, and the
Company shall have performed, satisfied and complied in all respects with the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied or complied with by
the Company at or prior to the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to the other matters set forth in the form attached hereto as Exhibit
J.
(i) PubCo shall have delivered to such Buyer a letter from PubCo’s transfer agent certifying
the number of shares of Common Stock outstanding as of the Closing Date before giving effect to the
transactions contemplated hereby.
(j) The Company and PubCo shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities.
(k) The Company shall have (i) received pay-off letters (as provided in Section 4(t) hereof
and in the form attached hereto as Exhibit S), from each holder of the Indebtedness
identified as “Subordinated Indebtedness” on Schedule 3(o) (the “Subordinated
Indebtedness”) providing for the satisfaction and cancellation of such Indebtedness upon the
payment by the Company of the Required Repayments, (ii) satisfied the Company’s obligations under
a management bonus pool plan of the Company (the “Restricted Stock Plan”) by making the Management
Payments, and the Company’s obligations under the Series C Preferred Stock and the Series D
Preferred Stock upon the payment of the cash and shares of Common Stock to the persons and in the
amounts set forth on Schedule 3(aa)(ii) and (iii) paid in full and retired all other
Indebtedness of the Company and PubCo (other than the Permitted Indebtedness and the Senior
Indebtedness).
(l) The Company, Xxxxx Fargo Bank National Association (with its participants, successors and
assigns (“WFB”), acting through its Xxxxx Fargo Business Credit operating division, the Company and
certain of the Company’s Subsidiaries party to the Credit Facility (as defined in the Notes) shall
have entered into amendments to the documents related to the Senior Indebtedness (as defined in the
Notes) on the terms set forth on Exhibit K, and WFB, the Company, PubCo and each Buyer
shall have entered into and delivered the Subordination Agreement in the form of Exhibit L
(the “Subordination Agreement”).
(m) Within 6 Business Days prior to the Closing, the Company shall have delivered or caused to
be delivered to each Buyer certified copies of UCC financing statement search results listing any
and all effective financing statements filed within five years prior to such date in any applicable
jurisdiction that name the Company, PubCo or any of their Subsidiaries as a debtor to perfect an
interest in any of the assets thereof, together with copies of such financing statements, none of
which financing statements, except for any financing statements filed with respect to the Senior
Indebtedness and as otherwise agreed to in writing by the Buyers, shall cover any of the Collateral
(as defined in the Security Documents), and the results of searches for any effective tax liens and
judgment liens filed against any such Person or its property in any applicable jurisdiction, which
results, except as otherwise agreed to in writing by the Buyers, shall not show any such effective
tax liens and judgment liens.
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(n) The Company and each Subsidiary shall have delivered or caused to be delivered to such
Buyer a Guaranty in the form attached hereto as Exhibit F duly and validly executed and
delivered by the Company.
(o) Not less than 90% of the Company’s equity shall be acquired in a manner and for
consideration described in the Share Purchase Agreement attached as Exhibit M hereto (the
“Share Purchase”) by Global Employment Holdings, Inc., a Delaware corporation (hereinafter referred
to as “PubCo”), which entity shall be incorporated and in good standing in the State of Delaware,
and the terms of which shall otherwise be satisfactory to Amatis Limited in its sole discretion.
(p) The Company or PubCo shall have filed a Certificate of Merger with the Colorado Secretary
of State pursuant to Section 0-000-000 of the Colorado Business Corporations Act whereby a
wholly-owned subsidiary of PubCo will be merged with and into the Company (the “Merger”), pursuant
to which each share of the remaining equity securities of the Company not acquired by PubCo in the
Share Purchase will be converted into the same number of shares of Common Stock as in the Share
Purchase (the “Share Exchange”), and after giving effect to the Merger, the Required Repayments and
the Management Payments, the shareholders of the Company, management and the holders of the
Subordinated Indebtedness immediately prior to the Share Purchase, the Merger, the Required
Repayments and the Management Payments will own, on a fully-diluted basis following completion of
the Share Purchase, the Merger, the Required Repayments and the Management Payments but before
giving effect to the Junior Financing (as defined in Section 7(v)), not less than 97% of PubCo’s
common equity.
(q) The Company shall have delivered to each Buyer audited financial statements of the Company
prepared in accordance with GAAP for the periods ended December 28, 2003, January 2, 2005 and
January 1, 2006, audited by Xxxxx Xxxxxxx XxXxxx P.C. or another auditing firm of regionally
recognized standing acceptable to Amatis Limited in its sole discretion, which financial statements
(i) shall contain an opinion of such auditor prepared in accordance with generally accepted
auditing standards (which opinion shall be without (x) a “going concern” or like qualification or
exception, (y) any qualification or exception as to the scope of such audit, or (z) any
qualification which relates to the treatment or classification of any item and which, as a
condition to the removal of such qualification, would require an adjustment to such item, the
effect of which would be to cause any noncompliance with the provisions of Section 14(e) (financial
covenants) of the Notes), (ii) shall fulfill the financial statement requirements for inclusion in
both the Current Report on Form 8-K and registration statement on Form S-1 that PubCo will be
obligated to file following the Closing, (iii) shall be materially in conformity with the financial
statements of the Company (audited by Xxxxx Xxxxxxxx) for the periods ended December 28, 2003 and
January 2, 2005 previously provided to the Buyers (other than any non-material change in the
balance of the accrued liability related to the worker’s compensation insurance program in place
prior to August 2002, as more fully explained in Notes A and N to the 2004 annual report (the
“Worker’s Compensation Adjustment”)), and (iv) shall reflect earnings before interest, taxes,
depreciation and amortization (EBITDA) (after adjustment for (A) the Worker’s Compensation
Adjustment, (B) the annual management fee to KRG Capital Partners, LLC, (C) charges related to
employee terminations in the first quarter of 2005, (D) fees and expenses related to the Share
Purchase, the Required Repayments, the Management Payments and the transactions contemplated hereby
and (E) accounting treatment of the Share
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Purchase, the Merger, the Required Repayments, the Management Payments and the transactions
contemplated hereby with respect to outstanding management equity plan shares and preferred shares
of the Company prior to giving effect to the transactions contemplated hereby)) for the fiscal year
ended January 1, 2006 of at least $10,500,000.
(r) Assuming the payment of the Special Dividend, the Required Repayments and the Management
Payments, PubCo’s capitalization and contingent liabilities shall be substantially identical to
that set forth on Exhibit N hereto, after giving effect to the Share Purchase, the Required
Repayments, the Merger, the Special Dividends, the Management Payments, the increase in Senior
Indebtedness as contemplated in Exhibit K attached hereto and the Junior Financing (as
defined below), and Xxxxx Xxxxxxx XxXxxx P.C. (or the other auditing firm referred to in clause (q)
above) shall have delivered to such Buyer a statement that such firm has reviewed the pro forma
capitalization and contingent liabilities, such statement to be in substantially similar form to a
customary comfort letter issued to an underwriter in connection with a registration statement on
Form S-1.
(s) Each Executive Officer and officer of PubCo who assumes the duties of any such Executive
Officer after the date hereof shall have entered into non-competition and non-solicitation
agreements with the Company and PubCo in the form of Exhibit O and in substance
satisfactory to Amatis Limited in its sole discretion, together with agreements between each such
member of management and PubCo providing that (i) PubCo shall not grant demand or piggyback
registration rights to any such individual or otherwise agree to register any securities held by
any such individual for resale, for a period of one year, and (ii) no such individual shall sell
any securities of PubCo owned of record or beneficially by such individual for one year from
Closing and no such individual shall sell more than one-third of his or her securities owned of
record or beneficially at the Closing for a period of within two years from the Closing Date.
(t) There shall not have developed, occurred, or come into effect or existence after the date
hereof any change, or any development involving a prospective change, in or affecting the position
of the Company or PubCo, financial or otherwise, that has had, or would be expected to have, a
Material Adverse Effect on the Company’s or PubCo’s general affairs, management, financial
condition, shareholders’ equity, results of operations or prospects, as determined by Amatis
Limited in its sole discretion.
(u) There shall not have developed, occurred or come into effect or existence (A) any
suspension or material limitation in trading in securities generally or of PubCo’s shares, (B) a
moratorium on commercial banking activities by either federal or New York State authorities, or (C)
any event, action, state, condition or major financial occurrence of national or international
consequence, including any outbreak or escalation or hostilities, acts of terrorism, war, national
or international emergency, calamity or crisis or like event, or any governmental action, law,
regulation, inquiry or other occurrence of any nature which, in the case of any event specified in
this clause (C), in the sole opinion of Amatis Limited, materially adversely affects or may
materially affect the financial markets or the business, operations, affairs or prospects of the
Company or PubCo.
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(v) The Company shall have, concurrently with the Closing, consummated the transactions
contemplated by the purchase agreements attached hereto as Exhibit P and Exhibit Q
securing financing of at least $12.75 million of preferred stock (the “Preferred Equity”) and at
least $4.25 million of Common Stock (the “Common Equity”), respectively (collectively the “Junior
Financing”), provided, however, the Junior Financing may be reduced to not less
than $14.0 million provided that every dollar of reduction of the Junior Financing shall result in
an additional dollar of equity from the current shareholders of the Company being rolled over into
equity of PubCo, and provided, further, that any such reduction in the Junior
Financing shall be made pro rata between the Preferred Equity and the Common Equity.
(w) The Company shall have, concurrently with the Closing, paid in full and retired all
Indebtedness of the Company and PubCo (other than the Permitted Indebtedness and the Senior
Indebtedness set forth on Schedule 3(o).
(x) PubCo shall have executed and delivered a joinder agreement to this Agreement, in the form
of Exhibit R, dated as of the Closing Date (the “Joinder Agreement”), to the effect that
upon the Closing (i) each of the representations and warranties made by the Company set forth in
Section 3 hereof, mutatis mutundis, shall be true and correct as if each reference to the Company
in such representations and warranties was a reference to PubCo, (ii) PubCo assumes all covenants
and obligations of PubCo set forth herein and (iii) PubCo assumes all covenants and obligations of
the Company set forth herein (including, without limitation, all indemnification obligations) as if
each obligation of the Company and each reference thereto contained elsewhere herein was an
obligation of and a reference to PubCo.
(y) Such Buyer shall have been satisfied, in its sole discretion, as to its due diligence
investigation of PubCo, including, without limitation, the audited annual financial statements of
PubCo.
(z) All equity securities and derivative securities convertible or exercisable into equity
securities of PubCo or the Company, shall have been, concurrently with the Closing, cancelled or
terminated.
(aa) The Company shall have delivered to such Buyer such other customary documents relating to
the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably
request.
8. TERMINATION. In the event that the Closing shall not have occurred with respect to
a Buyer on or before March 31, 2006 due to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and a nonbreaching party’s failure to waive such
unsatisfied condition(s)), any such nonbreaching party shall have the option to terminate Sections
1, 5, 6 and 7 of this Agreement with respect to such breaching party at the close of business on
such date without liability of any party to any other party, except as set forth below; provided,
however, if the foregoing Sections of this Agreement are terminated pursuant to this Section 8, the
Company shall remain obligated to reimburse the non-breaching Buyers for the amounts described in
Section 4(f) above. Notwithstanding the foregoing, if at any time prior to December 28, 2006, (i)
the Company closes any transaction or series of transactions, other than the transactions
contemplated hereby, which has the effect of recapitalizing the Company,
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either by paying down existing senior lenders or by refinancing other than a refinancing of
the existing Indebtedness with Xxxxx Fargo Business Credit or subsequent refinancing of same
(provided that in no event shall such Indebtedness be increased or be on materially different
terms) or involves any Subsequent Placement or (ii) the Company receives an offer for any of the
foregoing and within twelve months thereof, pursues such transaction or series of transactions as
within such twelve month period then, the Company shall promptly pay to Amatis Limited $150,000
(the “Break-up Fee”) in addition to any costs and expenses that the Company will be obligated to
pay hereunder; provided, that (A) if the parties fail to reach mutually acceptable terms to
consummate the transactions contemplated hereby or (B) if the transactions contemplated hereby are
not consummated due to the failure of the Buyers to fulfill their obligations under this Agreement,
the Company shall not be obligated to pay the Break-up Fee.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
- 29 -
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other than by an instrument in writing
signed by the Company and the holders of at least 66-2/3% of the aggregate principal amount of
Notes to be issued hereunder, and any amendment to this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable. No provision hereof may be waived other than by an instrument in writing signed by the
party against whom enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the applicable Securities then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, holders of Notes, or holders of
the Warrants, as the case may be. The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
Global Employment Solutions, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
Copy to:
Xxxxxxxxxx Hyatt & Xxxxxx, P.C.
000 00xx Xxxxxx
000 00xx Xxxxxx
- 00 -
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with
copies to such Buyer’s representatives as set forth on the Schedule of Buyers,
Copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Notes or the Warrants. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of at least 66 2/3% of the aggregate
principal amount of Notes issued hereunder, including by way of a Fundamental Transaction (unless
the Company is in compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes and the Warrants). A Buyer may assign some or all of its rights hereunder
without the consent of the Company, in which event such assignee shall be deemed to be a Buyer
hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, except to the extent set forth
in Section 9(k) below.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3 and the
agreements and covenants set forth in Sections 4, 5, 8 and 9 shall survive the Closing. Each Buyer
shall be responsible only for its own representations, warranties, agreements and covenants
hereunder.
- 31 -
(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company, on behalf of itself and
PubCo, shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company or PubCo in any Transaction Documents, (b) any breach of any covenant,
agreement or obligation of the Company or PubCo contained in any Transaction Documents or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a third party (including
for these purposes a derivative action brought on behalf of the Company or PubCo) and arising out
of or resulting from (i) the execution, delivery, performance or enforcement of any Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure made by such
Buyer pursuant to Section 4(h) hereof, or (iv) the status of such Buyer or holder of the Securities
as an investor in the Company or PubCo pursuant to the transactions contemplated by the Transaction
Documents. To the extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and obligations under this
Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
(l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(m) Remedies. Each Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes, on behalf of itself and PubCo,
that in the event that it fails to perform, observe, or
- 32 -
discharge any or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be
entitled to seek temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages and without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company or PubCo makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction Documents or the
Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required
to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other
Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement or setoff had not
occurred.
- 33 -
(o) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of entity
or group, or create a presumption that the Buyers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Documents.
Each Buyer confirms that it has independently participated in the negotiation of the transaction
contemplated by this Agreement and the Transaction Documents with the advice of its own counsel and
advisors, that it has independently determined to enter into the transactions contemplated hereby
and thereby, that it is not relying on any advice from or evaluation by any other Buyer, and that
it is not acting in concert with any other Buyer in making its purchase of Securities hereunder or
in monitoring its investment in PubCo. The Buyers and, to its knowledge, the Company agree that no
action taken by any Buyer pursuant hereto or to the other Transaction Documents, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of entity
or group, or create a presumption that the Buyers are in any way acting in concert or would deem
such Buyers to be members of a “group” for purposes of Section 13(d) of the 1934 Act. The Buyers
have not agreed to act together for the purpose of acquiring, holding, voting or disposing of
equity securities of PubCo. The Company has elected to provide all Buyers with the same terms and
Transaction Documents for the convenience of the Company and not
because it was required
or requested to do so by any of the Buyers. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a presumption
that the Buyers are
in any way acting in concert or as a “group” for purposes of Section 13(d) of the 1934 Act
with respect to the Transaction Documents or the transactions contemplated hereby or thereby. Each
Buyer shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and
it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding
for such purpose.
[Signature Page Follows]
- 34 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| COMPANY: | ||||
| GLOBAL EMPLOYMENT SOLUTIONS, INC. | ||||
| By: | /s/ Xxxxxx Xxxxx | |||
| Name: Xxxxxx Xxxxx | ||||
| Title: President and Chief Executive Officer | ||||
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYERS: | ||||||
| AMATIS LIMITED | ||||||
| By: | Amaranth Advisors, L.L.C., | |||||
| Its Trading Advisor | ||||||
| By: | /s/ Xxxx X. Xxxxxxx SVC | |||||
| Name: | Xxxx X. Xxxxxxx | |||||
| Title: | Authorized Signatory | |||||
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| OTHER BUYERS: | ||||||
| RADCLIFFE SPC, LTD. | ||||||
| for and on behalf of the Class A Convertible | ||||||
| Crossover Segregated Portfolio | ||||||
| By: | RG Capital Management, L.P. | |||||
| By: RGC Management Company, LLC | ||||||
| By: | /s/ XXXXXX X. XXXXXXXXXX | |||||
| Name: | Xxxxxx X. Xxxxxxxxxx | |||||
| Title: | Managing Director | |||||
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYERS: | ||||
| MAGNETAR CAPITAL MASTER | ||||
| FUND, LTD | ||||
| By: Magnetar Financial LLC | ||||
| Its: Investment Manager | ||||
| By: | /s/ XXXX XXXXX | |||
| Name: Xxxx Xxxxx | ||||
| Title: General Counsel | ||||
It is expressly understood and agreed that any closing condition requiring the execution and delivery of any agreement containing a “lock-up” (including, without limitation, as set forth in Section 7(s)) shall not be applicable to the purchase by, or for the benefit of, Magnetar Capital Master Fund, Ltd. notwithstanding anything contained in this Agreement or in any such agreement.
It is expressly understood and agreed that the purchase by Magnetar Capital Master Fund, Ltd. ("Magnetar") under this Agreement is subject to the Security Documents and the interests being granted therein only being for Magnetar’s benefit to the extent of Magnetar’s interest in Magnetar’s Note itself and not in any way with respect to any obligations of the Company with respect to any other security
of the Company (including, without limitation, the Common Stock, the Warrants or the Warrant Shares or under the Registration Rights Agreement) or to the extent that any of the foregoing may give rise obligations under Magnetar’s Note itself.
[Signature Page to Notes Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
BUYERS: |
||||
| By: | /s/ XXXXXXXX XXXX | |||
| Name: Title: |
Whitebox Intermarket Partners LP Whitebox Intermarket Advisors LLC Whitebox Advisors LLC Xxxxxxxx Xxxx, Chief Financial Officer/Director |
|||
| Whitebox Convertible Arbitrage Partners LP Whitebox Convertible Arbitrage Advisors LLC Whitebox Advisors LLC Xxxxxxxx Xxxx, Chief Financial Officer/Director |
||||
| Guggenheim Portfolio Company XXXI, LLC Guggenheim Advisors, LLC Whitebox Advisors LLC Xxxxxxxx Xxxx, Chief Financial Officer |
||||
| Pandora Select Partners LP Pandora Select Advisors LLC Xxxxxxxx Xxxx, Chief Financial Officer/Director |
||||
[Signature Page to Notes Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature
page to this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYERS: Context Convertible Arbitrage Fund, LP |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | CIO & Co-Chairman Context Capital Management LLC General Partner |
|||
| BUYERS: Context Convertible Arbitrage Offshore, Ltd |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | CIO & Co-Chairman Context Capital Management LLC Investment Adviser |
|||
| BUYERS: Context Opportunistic Master Fund, LP |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | CIO & Co-Chairman Context Capital Management LLC Investment Adviser |
|||
[Signature Page to Notes Securities Purchase Agreement]
SCHEDULE OF BUYERS
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||
| Aggregate | ||||||||||||||||
| Principal | ||||||||||||||||
| Address and | Amount of | Number of | Convertible Debt | Legal Representative’s Address | ||||||||||||
| Buyer | Facsimile Number | Notes | Warrant Shares | Purchase Price | and Facsimile Number | |||||||||||
Amatis Limited |
c/o Amaranth Advisors L.L.C. | Xxxxxxx Xxxx & Xxxxx LLP | ||||||||||||||
| One American Lane | 000 Xxxxx Xxxxxx | |||||||||||||||
| Xxxxxxxxx, XX 00000 | Xxx Xxxx, Xxx Xxxx 00000 | |||||||||||||||
| Attention: General Counsel | Attention: Xxxxxxx Xxxxx, | |||||||||||||||
| Facsimile: (000) 000-0000 | Esq. | |||||||||||||||
| Telephone: (000) 000-0000 | Facsimile: (000) 000-0000 | |||||||||||||||
| Residence: Cayman Islands | $ | 18,170,000.00 | 290,720.00 | $ | 18,170,000.00 | Telephone: (000) 000-0000 | ||||||||||
Radcliffe SPC, Ltd. |
c/o RG Capital Management, L.P. | |||||||||||||||
for and on behalf |
0 Xxxx Xxxxx - Xxxx, Xxxxx 000 | |||||||||||||||
of Class A |
Xxxx Xxxxxx, XX 00000 | |||||||||||||||
Convertible |
Attention: Xxxxxx Xxxxxxxxxx |
Drinker Xxxxxx & Xxxxx LLP | ||||||||||||||
Crossover |
Facsimile: (000) 000-0000 | One Xxxxx Square | ||||||||||||||
Segregated |
Telephone: (000) 000-0000 | Xxxxxxxxxxxx, XX 00000-0000 | ||||||||||||||
Portfolio |
Residence: Cayman Islands | $ | 2,500,000.00 | 40,000.00 | $ | 2,500,000.00 | Facsimile: (000) 000-0000 | |||||||||
Magnetar Capital |
0000 Xxxxxxxxx Xxx., #0000 | |||||||||||||||
Master Fund, Ltd. |
Xxxxxxxx, XX 00000 | |||||||||||||||
| Telephone: (000) 000-0000 | $ | 1,000,000.00 | 16,000.00 | $ | 1,000,000.00 | |||||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||
| Aggregate | ||||||||||||||||
| Principal | ||||||||||||||||
| Address and | Amount of | Number of | Convertible Debt | Legal Representative’s Address | ||||||||||||
| Buyer | Facsimile Number | Notes | Warrant Shares | Purchase Price | and Facsimile Number | |||||||||||
Whitebox |
0000 Xxxxxxxxx Xxxx., #000 | |||||||||||||||
Xxxxxxxxxxx |
Xxxxxxxxxxx, XX 00000 | |||||||||||||||
Arbitrage
Partners, LP |
Telephone: (000) 000-0000 | $ | 3,620,000.00 | 57,920.00 | $ | 3,620,000.00 | ||||||||||
Guggenheim |
0000 Xxxxxxxxx Xxxx., #000 | |||||||||||||||
Portfolio XXXI, LLC |
Xxxxxxxxxxx, XX 00000 | |||||||||||||||
| Telephone: (000) 000-0000 | $ | 260,000.00 | 4,160.00 | $ | 260,000.00 | |||||||||||
Pandora Select |
0000 Xxxxxxxxx Xxxx., #000 | |||||||||||||||
Xxxxxxxx, XX |
Xxxxxxxxxxx, XX 00000 | |||||||||||||||
| Telephone: (000) 000-0000 | $ | 560,000.00 | 8,960.00 | $ | 560,000.00 | |||||||||||
Whitebox |
0000 Xxxxxxxxx Xxxx., #000 | |||||||||||||||
Xxxxxxxxxxx |
Xxxxxxxxxxx, XX 00000 | |||||||||||||||
Partners, LP |
Telephone: (000) 000-0000 | $ | 560,000.00 | 8,960.00 | $ | 560,000.00 | ||||||||||
Context Convertible |
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx | |||||||||||||||
Arbitrage Fund, LP |
Xxxxxxxxx XX 00000 | |||||||||||||||
| Telephone: (000) 000-0000 | $ | 550,000.00 | 8,800.00 | $ | 550,000.00 | |||||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||
| Aggregate | ||||||||||||||||
| Principal | ||||||||||||||||
| Address and | Amount of | Number of | Convertible Debt | Legal Representative’s Address | ||||||||||||
| Buyer | Facsimile Number | Notes | Warrant Shares | Purchase Price | and Facsimile Number | |||||||||||
Context Convertible |
000 Xxxxxxxxx Xxxxxx, 0xx Floor | |||||||||||||||
Arbitrage Offshore, |
Xxxxxxxxx XX 00000 | |||||||||||||||
Ltd. |
Telephone: (000) 000-0000 | $ | 2,114,000.00 | 33,824.00 | $ | 2,114,000.00 | ||||||||||
Context |
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx | |||||||||||||||
Xxxxxxxxxxxxx |
Xxxxxxxxx XX 00000 | |||||||||||||||
Master Fund, L.P. |
Telephone: (000) 000-0000 | $ | 666,000.00 | 10,656.00 | $ | 666,000.00 | ||||||||||
DISCLOSURE SCHEDULE
Global Employment Solutions, Inc. (the “Company”) delivers these schedules (the
“Schedules”) in connection with the following agreements:
| • | Notes Securities Purchase Agreement, dated as of March 31, 2006, by and among the Company and various buyers (the “Notes SPA”) | ||
| • | Preferred Stock Securities Purchase Agreement, dated as of March 31, 2006, by and among the Company and various buyers (the “Preferred SPA”) | ||
| • | Common Stock Securities Purchase Agreement, dated as of March 31, 2006, by and among the Company and various buyers (the “Common SPA”) |
The Notes SPA, the Preferred SPA and the Common SPA are collectively referred to as the
“Agreements.” These Schedules are an integral part of the Agreements, are incorporated
therein by reference and are not intended to be an independent document. Disclosure of any item
herein shall not constitute an admission that such item is required to be disclosed, and the
information contained herein is disclosed solely for the purposes of the Agreements. Nothing
contained herein shall be deemed to be an admission by any party hereto to any third party of any
matter whatsoever, including, without limitation, any violation of law or breach of agreement. The
schedule numbers in these Schedules correspond to the section numbers in the Agreements.
References to any document do not purport to be complete and are qualified in their entirety by the
document itself. Capitalized terms used but not defined herein shall have the same meanings given
them in the Agreements.
Schedule 3(a)
Subsidiaries
Subsidiaries
The table below sets forth all subsidiaries of Global Employment Holdings, Inc. and the state
or other jurisdiction of incorporation or organization of each subsidiary.
| State of | ||
| Subsidiary | Incorporation | |
Global Merger Corp(1) |
CO | |
Global Employment Solutions, Inc.(2) |
CO | |
Excell Personnel Services, Inc.(3) |
IL | |
PD Quick Temps Inc.(4) (inactive) |
PA | |
Friendly Advanced Software Technology, Inc.(3) |
NY | |
Main Line Personnel Service, Inc.(3) |
PA | |
Southeastern Personnel Management, Inc.(3) |
FL | |
Southeastern Staffing, Inc.(3) |
FL | |
Bay HR, Inc.(5) |
FL | |
Placer Staffing, Inc.(5) (inactive) |
CA | |
Southeastern Georgia HR, Inc.(5) |
GA | |
Southeastern Staffing II, Inc.(5) |
FL | |
Southeastern Staffing III, Inc.(5) |
FL | |
Southeastern Staffing IV, Inc.(5) |
FL | |
Southeastern Staffing V, Inc.(5) |
FL | |
Southeastern Staffing VI, Inc.(5) |
FL | |
Temporary Placement Service, Inc.(3) |
GA |
| (1) | Wholly-owned subsidiary of Global Employment Holdings, Inc. | |
| (2) | Majority-owned subsidiary of Global Merger Corp | |
| (3) | Wholly-owned subsidiary of Global Employment Solutions, Inc. | |
| (4) | Wholly-owned subsidiary of Excell Personnel Services, Inc. | |
| (5) | Wholly-owned subsidiary of Southeastern Staffing, Inc. |
Schedule 3(m)
Transactions with Affiliates
Transactions with Affiliates
The Company leases office space in Dalton, Georgia from MPS Partnership in which Xxxxxxx
Xxxxxxxxxx, one of its executive officers, is a partner. For the fiscal years ended 2005, 2004 and
2003, the Company paid rent to MPS Partnership in the amounts of approximately $74,000, $74,250 and
$59,900, respectively. The Company expects to continue renting office space from Xx. Xxxxxxxxxx
for the foreseeable future.
The Company is party to a management consulting agreement with KRG Colorado, LLC (“KRG”), a
company controlled by some of the Company’s shareholders. The agreement will be terminated upon
the closing of the transaction contemplated by the Agreements. Under the agreement, the Company
receives management, advisory and corporate structure services from KRG for an annual fee. KRG is
eligible for a bonus fee, based on performance thresholds, for each fiscal year, and fees related
to acquisitions and divestitures. On November 15, 2001, KRG agreed to waive and forgive amounts
accrued as of that date. During the fiscal years ended January 1, 2006 and January 2, 2005, the
Company paid $180,000 and $90,000, respectively, in consulting fees, and such amounts were included
in operating expenses in the statements of income. The Company did not pay KRG under the agreement
during the fiscal year ended December 28, 2003.
The Company will cause PubCo to issue KRG 50,000 shares of PubCo common stock, valued at $5 per
share, upon the consummation of the transaction contemplated by the Agreements in consideration for
financial advisory services rendered by KRG during the transaction.
In 2001, KRG, advanced working capital funds to the Company in the approximate principal amount of
$1,500,000 in exchange for a promissory note. These advances are non-interest bearing and were to
mature on February 5, 2005, or share in distributable proceeds from a sale of the Company along
with other holders of the Company’s subordinated debt. On February 25, 2005, the maturity date of
these notes was extended to February 28, 2007. The Company will retire the debt on the closing of
the transaction contemplated by the Agreements through a payment partly in cash, partly in PubCo
common stock.
In 2001, as part of a recapitalization, certain of the management and debt and equity holders of
the Company formed a limited liability company named Global Investment I, LLC (the “LLC”)
for the purpose of purchasing at a discount certain senior debt of the Company. The Company then
issued its Series C preferred stock to the LLC to retire the senior debt and related accrued
interest. It is expected that the LLC will participate in the Recapitalization and thereby
exchange its shares of the Company’s Series C preferred stock for PubCo Common Stock. Furthermore,
it is expected that the LLC will dissolve and distribute to its members all its assets, including
any PubCo Common Stock held, shortly after the Closing.
Schedule 3(n)
Outstanding Securities
Outstanding Securities
542,166 warrants are exercisable into 542,166 shares of common stock at $.01 per share, at any time
prior to the earlier of March 13, 2008 or six years after the Company’s senior subordinated notes
are paid in full. The warrants provide the holders the right to require the Company to redeem them
for fair value at any time after July 29, 2003. Pursuant to Section 5.1(d) of the Share Purchase
Agreement, dated March 31, 2006, among GES, PubCo and GES shareholders signatory thereto, the
warrants are forfeited to GES and cancelled, without any further action required, in consideration
of the warrant holders’ receiving PubCo Common Stock and the Special Dividend upon consummation of
the transaction contemplated by the Agreements.
2,000,000 shares of GES common stock are issued under the Company’s Restricted Stock Plan; all of
these shares will be repurchased for the amount set forth on Schedule 3(aa)(ii) to the Notes SPA
and Schedule 3(y)(ii) to the Preferred SPA and the Common SPA.
Schedule 3(o)
Indebtedness and Other Contracts
Indebtedness and Other Contracts
Senior Indebtedness
Effective in March 2002 and as subsequently amended in June 2003, August 2004, January 2005 and May
2005, the Company and its subsidiaries executed a Credit and Security Agreement (the “Credit
Agreement”) with Xxxxx Fargo Bank, National Association (“Xxxxx Fargo”) for revolving
credit borrowings and letters of credit collateralized by the Company’s accounts receivable.
Maximum available borrowings of up to $10.0 million ($7.5 million prior to August 30, 2004) are
limited to 85% of eligible billed receivables and 70% of unbilled receivables. Interest was
payable at Xxxxx Fargo’s prime rate plus 1% per annum through August 29, 2004, and effective August
30, 2004, interest is payable at Xxxxx Fargo’s prime rate (7% at January 1, 2006), subject to a
minimum of $7,500 per month. A fee of 0.25% per annum is payable on the unused portion of the
commitment. The term of the Credit Agreement expires on July 31, 2006. There were no outstanding
borrowings at January 1, 2006 and January 2, 2005. The Credit Agreement requires certain customer
payments to be paid directly to blocked lockbox accounts controlled by Xxxxx Fargo, and the Credit
Agreement contains a provision that allows the lender to call the outstanding balance of the line
of credit if any material adverse change in the business or financial condition of the Company
occurs. As of the date hereof and prior to giving effect to the transaction contemplated by the
Agreements, there is an aggregate of $235,085 outstanding under the Credit Agreement, consisting of
two outstanding letters of credit with Xxxxx Fargo, both of which will remain outstanding after the
closing of the transaction contemplated by the Agreements until they expire on December 31, 2006.
Concurrently with the Closing, the Credit Agreement will be further amended pursuant to a Fifth
Amendment to the Credit Agreement that will effect the following changes to the credit facilities
provided by Xxxxx Fargo: (i) the maximum amount of revolving credit borrowings (including letters
of credit) will be increased to $15.0 million and the maturity date for the revolving portion of
the credit facility will be extended to January 31, 2009, (ii) Xxxxx Fargo will provide a term loan
to the borrowers under the Credit Agreement in the amount of $5.0 million, with interest thereon to
accrue at Xxxxx Fargo’s prime rate plus 2.75% per annum, and payable based on a 36-month
amortization with a balloon payment at maturity on April 1, 2008, (iii) 25% of excess cash flow of
the borrowers will be applied to make principal payments in respect of the term loan on an annual
basis, (iv) advance rates will change to 90% for eligible billed accounts receivable and 75% for
eligible unbilled accounts receivable (reducing to 85% and 70%, respectively, upon payment of the
term loan), (v) the borrowers will pay an amendment fee of $175,000 to Xxxxx Fargo concurrently
with the Closing, (vi) the requirement for minimum average availability under the revolving portion
of the credit facility will be increased to $2.0 million, and (vii) certain changes will be made to
the financial covenants imposed by the Credit Agreement.
Subordinated Indebtedness
Senior Subordinated Notes
On March 13, 1998, the Company entered into a senior subordinated Note Purchase Agreement as part
of its acquisition of Temporary Placement Service, Inc. and Excell Personnel Service Corporation.
This agreement was amended on July 29, 1998, and September 11, 1998, in conjunction with the
Company’s acquisitions of four other companies. This agreement was further amended on November 15,
2001 as part of a recapitalization.
The senior subordinated notes bore interest at a fixed annual rate of 13% per annum. Monthly
interest payments of approximately $151,000 were originally to be paid through September 30, 2004.
However, interest payments have not been made after November 2000, and as amended in conjunction
with a 2001 recapitalization, all remaining principal, together with all unpaid interest as of
November 15, 2001, was payable on February 28, 2005. However, on February 25, 2005 the maturity
date of these notes was extended to February 28, 2007. Interest ceased to accrue on these notes
effective November 15, 2001. If the Company is sold prior to maturity, the subordinated note
holders will be entitled to receive only the amount provided for by the sales proceeds distribution
schedule as described in the Master Investment Agreement.
The Company will retire the senior subordinated notes on the closing of the transaction
contemplated by the Agreements through a payment partly in cash, partly in PubCo Common Stock.
Purchase Money Subordinated Notes
In conjunction with the Company’s purchase of Southeastern Staffing, Inc., the Company issued
subordinated notes to the sellers that bore interest at a fixed rate of 8% per annum, payable
quarterly. Quarterly principal payments were to commence June 30, 2000, until paid in full, with
any remaining balance due at maturity on July 29, 2005. As part of a 2001 recapitalization,
effective November 15, 2001, the remaining notes no longer bear interest and were scheduled to
mature July 29, 2005, or share in proceeds from a sale of the Company along with other subordinated
note holders. On February 25, 2005, the maturity date of these notes was extended to February 28,
2007.
The Company will retire the purchase money subordinated notes on the closing of the transaction
contemplated by the Agreements through a payment partly in cash, partly in PubCo Common Stock.
KRG Colorado, LLC Subordinated Note
In 2001, KRG advanced working capital funds to the Company in the approximate principal amount of
$1,500,000 in exchange for a promissory note. These advances are non-interest bearing and were to
mature on February 5, 2005, or share in distributable proceeds from a sale of the Company along
with other holders of the Company’s subordinated debt. On February 25, 2005, the maturity date of
these notes was extended to February 28, 2007.
The Company will retire the subordinated note on the closing of the transaction contemplated by the
Agreements through a payment partly in cash, partly in PubCo Common Stock.
Financing Statements to Secure Indebtedness
| Debtor | Secured Party | Type | File # | Collateral | ||||
Global Employment Solutions, Inc. |
Xxxxx Fargo Business Credit, Inc. | Financing Statement (and 3 amendments) |
20012107251 20022009136 20022017483 20022032356 |
Personal property | ||||
Global Employment Solutions, Inc. |
U.S. Bancorp | Financing Statement |
20012113564 | Equipment lease | ||||
Bay HR, Inc.
|
Xxxxx Fargo Business Credit, Inc |
Financing Statement |
200407033031 | Personal property | ||||
Excell Personnel Service Corporation |
Xxxxx Fargo Business Credit, Inc |
Financing Statement (and 1 amendment) |
4465054000 4807456 |
Personal property | ||||
Friendly Advanced Software Technology, Inc. |
Xxxxx Fargo Business Credit, Inc |
Financing Statement (and 3 amendments) |
228104 040570 040572 070535 |
Personal property | ||||
Main Line Personnel Services, Inc. |
Xxxxx Fargo Business Credit, Inc |
Financing Statement (and 1 amendment) |
34590242 34941059 |
Personal property | ||||
Main Line Personnel Services, Inc. |
CIT Technology Financing Services, Inc. | Financing Statement |
20220007868 | Equipment lease | ||||
Main Line Personnel Services, Inc. |
Citicorp Vendor Finance, Inc. | Financing Statement |
20040080356 | Equipment lease | ||||
Main Line Personnel Services, Inc.(1) |
General Electric Capital Corporation |
Financing Statement |
2006011902869 | Accounts receivable | ||||
Southeastern Georgia HR, Inc. |
Xxxxx Fargo Business Credit, Inc. | Financing Statement |
000-0000-000000 | Personal property | ||||
Southeastern Personnel Management, Inc. |
Xxxxx Fargo Business Credit, Inc. | Financing Statement |
200202990026 | Personal property | ||||
Southeastern Staffing, Inc. |
Xxxxx Fargo Business Credit, Inc. | Financing Statement |
200200554253 | Equipment lease | ||||
Southeastern Staffing, Inc. |
Greatamerica Leasing Corporation |
Financing Statement |
200202295468 | Equipment lease |
| Debtor | Secured Party | Type | File # | Collateral | ||||
Southeastern Staffing, Inc. |
Eplus Group, Inc. | Financing Statement |
200304038731 | Equipment lease | ||||
Southeastern Staffing, Inc. |
Xxxxx Business Finance Corporation |
Financing Statement |
200304744067 | Equipment lease | ||||
Southeastern Staffing, Inc. |
Xxxxx Business Finance Corporation |
Financing Statement |
200305356982 | Equipment lease | ||||
Southeastern Staffing, Inc. |
Greatamerica Leasing Corporation |
Financing Statement |
20040722922X | Equipment lease | ||||
Southeastern Staffing, Inc. |
Credential Leasing Corp of Florida, Inc. | Financing Statement |
200509981737 | Equipment lease | ||||
Southeastern Staffing, Inc. |
Inter-Tel Leasing | Financing Statement |
200601654402 | Equipment lease | ||||
Temporary Placement Service, Inc. |
US Bancorp | Financing Statement |
000-0000-000000 | Equipment lease | ||||
Temporary Placement Service, Inc. |
Xxxxx Fargo Business Credit, Inc. | Financing Statement (and 4 amendments) |
000-0000-000000 000-0000-000000 000-0000-000000 000-0000-000000 000-0000-000000 |
Personal property |
| (1) | See Section 4(v) in the Notes SPA. |
Schedule 3(o)(i)
Permitted Indebtedness
Permitted Indebtedness
Senior Indebtedness
Permitted Liens to secure Senior Indebtedness
Permitted Liens securing the Company’s obligations under the Notes
Permitted Liens to secure Senior Indebtedness
Permitted Liens securing the Company’s obligations under the Notes
We have capitalized lease obligations for office furniture and equipment in the aggregate amount of
$135,546 as of January 1, 2006. We also have other leases that would qualify as capitalized
leases, for example copier leases, but we account for them as operating leases because of the
immateriality of such leases.
Schedule 3(v)
Subsidiary Rights
Subsidiary Rights
Senior Indebtedness restricts, but does not preclude altogether, payment of dividends by the
Company and its subsidiaries.
Schedule 3(w)
Tax Status
Tax Status
The Company and two of its subsidiaries, Southeastern Staffing, Inc. (including all of Southeastern
Staffing, Inc.’s subsidiaries) and Southeastern Personnel Management, Inc., have a tax sharing
agreement. Southeastern Staffing, Inc. (including all of its subsidiaries) and Southeastern
Personnel Management file a consolidated tax return with the Company, and the income tax provision
(benefit) is allocated based on the separate return method.
Schedule 3(y)(i) to Preferred Stock Securities Purchase Agreement and
Common Stock Securities Purchase Agreement — Required Repayments
Schedule 3(aa)(i) to Notes Securities Purchase Agreements — Required Repayments
Common Stock Securities Purchase Agreement — Required Repayments
Schedule 3(aa)(i) to Notes Securities Purchase Agreements — Required Repayments
| Sub Debt | ||||||||||||
| Principal | Cash | |||||||||||
| Invested | Distribution | # of Shares ($5.00) | ||||||||||
Parties to the Note
Purchase Agreement,
Dated March 13, 1998,
as amended: |
||||||||||||
Seacoast Capital |
$ | 4,300,000.00 | $ | 4,184,998.64 | 23,000.272 | |||||||
Pacific Mezzanine |
2,866,000.00 | 2,789,350.26 | 15,329.949 | |||||||||
Stratford Capital |
4,050,000.00 | 3,941,684.77 | 21,663.047 | |||||||||
Rocky Mountain Capital |
2,750,000.00 | 2,676,452.62 | 14,709.476 | |||||||||
Subtotal |
$ | 13,966,000.00 | $ | 13,592,486.28 | 74,702.744 | |||||||
Party to the
Promissory Note dated
November 15, 2001: |
||||||||||||
KRG Colorado, LLC |
1,500,000.00 | $ | 1,459,883.25 | 8,023.351 | ||||||||
Parties to the
Subordinated
Promissory Note
Agreement, Dated July
29, 1988: |
||||||||||||
Xxxxxx Xxxxxx |
457,965.06 | $ | 445,717.01 | 2,449.610 | ||||||||
Xxxx Xxxxxxxx |
25,944.36 | 25,250.49 | 138.774 | |||||||||
Subtotal |
$ | 483,909.42 | $ | 470,967.50 | 2,588.384 | |||||||
Total |
$ | 15,949,909.42 | $ | 15,523,337.03 | 85,314.479 | |||||||
Schedule 3(y)(ii) to Prefered Stock Securities Purchase Agreement and
Common Stock Securities Purchase Agreement — Management Payments
Schedule 3(aa)(ii) to Notes Securities Purchase Agreement — Management Payments
Common Stock Securities Purchase Agreement — Management Payments
Schedule 3(aa)(ii) to Notes Securities Purchase Agreement — Management Payments
GES
Restricted Stock Plan Distributions
Restricted Stock Plan Distributions
| Distributed at Close of Reverse Merger | ||||||||||||
| Restricted Stock | Cash | |||||||||||
| Allocated Shares | Consideration | # of Shares ($5.00) | ||||||||||
Investor Payouts |
||||||||||||
Xxxxxx Xxxxx |
716,432.04 | $ | 3,993,817.33 | 723,538.15 | ||||||||
Xxxxxx Xxxxxxxxxx |
240,968.95 | 1,343,304.02 | 243,359.06 | |||||||||
Xxxxxx Xxxxxx |
207,530.79 | 1,156,899.83 | 209,589.24 | |||||||||
Xxx Xxxxxxxx |
51,768.67 | 288,589.28 | 52,282.15 | |||||||||
Xxxxxxx Xxxxxxxx |
149,838.40 | 835,288.20 | 151,324.61 | |||||||||
Xxxxx Xxxx |
121,090.50 | 675,030.36 | 122,291.57 | |||||||||
Xxxxxxx Xxxxxxx |
82,108.83 | 457,723.38 | 82,923.25 | |||||||||
Xxxxxxx X’Xxxxxxxx |
77,830.58 | 433,873.85 | 78,602.56 | |||||||||
Xxxx Xxxxxxxx |
68,081.52 | 379,526.80 | 68,756.80 | |||||||||
Xxxxxx Xxxxxxxxxx |
48,285.15 | 269,170.08 | 48,764.08 | |||||||||
Xxxxxx Xxxxxxx |
20,000.00 | 111,491.87 | 20,198.38 | |||||||||
Xxxxxxx Xxxxxx |
18,354.05 | 102,316.35 | 18,536.10 | |||||||||
Xxxxx Xxxxxxxx |
11,810.54 | 65,838.99 | 11,927.69 | |||||||||
Xxxx Xxxxxxx |
11,810.54 | 65,838.99 | 11,927.69 | |||||||||
Xxxxxxx Xxxxxxxx |
11,250.00 | 62,714.18 | 11,361.59 | |||||||||
Xxxx Xxxxxxx |
10,938.00 | 60,974.90 | 11,046.49 | |||||||||
Xxxxxxx Xxxxxxx |
10,000.00 | 55,745.94 | 10,099.19 | |||||||||
Xxxxx Xxxxxx |
6,613.91 | 36,869.83 | 6,679.51 | |||||||||
Xxxxxxxx Xxxxxxxx |
6,000.00 | 33,447.56 | 6,059.51 | |||||||||
Xxxxx Xxxxxxx |
5,886.00 | 32,812.06 | 5,944.38 | |||||||||
Xxxxxxx Xxxxx |
5,463.00 | 30,454.01 | 5,517.19 | |||||||||
Xxxx Xxxxxxx |
5,000.00 | 27,872.97 | 5,049.59 | |||||||||
Xxxxxxx Xxxxx |
4,750.00 | 26,479.32 | 4,797.11 | |||||||||
Xxxxxxx Stocks |
4,724.22 | 26,335.59 | 4,771.08 | |||||||||
Xxxxxxxx XxXxx |
4,724.22 | 26,335.59 | 4,771.08 | |||||||||
Xxxxxxx Xxxxxxx |
4,724.22 | 26,335.59 | 4,771.08 | |||||||||
Xxxxxxx Xxxxxxxx |
3,779.37 | 40,152.78 | — | |||||||||
Xxxxx Xxxxx |
3,779.37 | 40,152.78 | — | |||||||||
X. Xxxxxxxxx |
3,560.00 | 37,822.11 | — | |||||||||
Xxxxx Xxxxxxxx |
3,401.44 | 36,137.50 | — | |||||||||
Xxxxx Xxxxxxx |
3,115.00 | 33,094.35 | — | |||||||||
Xxxxxxxx Xxxxxxxxx |
2,912.00 | 30,937.63 | — | |||||||||
Xxxxxx Xxxxxxxx |
2,834.53 | 30,114.59 | — | |||||||||
Xxxxxx Xxxxxxxx |
2,834.53 | 30,114.59 | — | |||||||||
Xxxxx Xxxxxxxx |
2,834.53 | 30,114.59 | — | |||||||||
Xxxxx Xxxxxxx |
2,694.00 | 28,621.56 | — | |||||||||
Xxxx Xxxxxxxx |
2,362.11 | 25,095.49 | — | |||||||||
Xxxxxx Xxxxxxxxx |
2,301.00 | 24,446.26 | — | |||||||||
Xxxxxxx XxXxxxxxx |
1,987.00 | 21,110.27 | — | |||||||||
Xxxxxxx Xxxxxx |
2,362.11 | 25,095.49 | — | |||||||||
Xxxxxxxxx Xxxxxx |
1,889.69 | 20,076.39 | — | |||||||||
Xxxxxxxx Xxxxxxxx |
2,087.42 | 22,177.11 | — | |||||||||
Xxxx Xxxxxxxxx |
1,889.69 | 20,076.39 | — | |||||||||
Xxxxxxx Xxxxxxxx |
2,362.11 | 25,095.49 | — | |||||||||
Xxxxxx Xxxxxxxxx |
1,742.00 | 18,507.33 | — | |||||||||
Xxxx Xxxxx |
1,655.00 | 17,583.04 | — | |||||||||
Xxxxx XxXxxxxx |
1,655.00 | 17,583.04 | — | |||||||||
Xxxxxx Xxxx-Xxxxxxx |
1,526.00 | 16,212.51 | — | |||||||||
Xxxxx Xxxx |
750.00 | 7,968.14 | — | |||||||||
Xxxxxxxxx Xxxxx |
1,417.27 | 15,057.29 | — | |||||||||
Xxxxx Xxxxx |
1,417.27 | 15,057.29 | — | |||||||||
Xxxxxx Xxxxx |
1,417.27 | 15,057.29 | — | |||||||||
Xxxxxx Xxxxxx |
1,417.27 | 15,057.29 | — | |||||||||
Xxxxx Xxxxxx |
1,417.27 | 15,057.29 | — | |||||||||
Xxxxxxx Xxxxx |
1,100.00 | 11,686.61 | — | |||||||||
Xxxxxxx Xxxxxx |
1,079.00 | 11,463.50 | — | |||||||||
Xxxxxx Xxxxx |
1,019.00 | 10,826.05 | — | |||||||||
Xxxxxxx Xxxxxx |
1,012.00 | 10,751.68 | — | |||||||||
Xxxxx Xxxxxx |
1,000.00 | 10,624.19 | — | |||||||||
Xxxxxxxxx Xxxxxxxxxx |
966.00 | 10,262.97 | — | |||||||||
Xxxxx Xxxxxxxxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxx Xxxxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxxx Xxxxxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxxx Xxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxx Xxxxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxx Xxxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxxxxx Xxxxxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxxx Xxxxx |
615.00 | 6,533.88 | — | |||||||||
Xxxxxx Xxxxx |
600.00 | 6,374.51 | — | |||||||||
Xxxxxxx XxXxxxxx |
552.00 | 5,864.55 | — | |||||||||
Xxxxxx Xxxxxxxx |
548.00 | 5,822.05 | — | |||||||||
Xxxxxx Xxxxxxxx |
537.00 | 5,705.19 | — | |||||||||
Xxxxxxxx Xxxx |
500.00 | 5,312.09 | — | |||||||||
Xxxxxx Xxxxx |
500.00 | 5,312.09 | — | |||||||||
Xxxxxxxx Xxxxxxx |
500.00 | 5,312.09 | — | |||||||||
Xxxxxxxxx Xxxxxxxxxxxxx |
500.00 | 5,312.09 | — | |||||||||
Xxxxx Xxxxxxxx |
500.00 | 5,312.09 | — | |||||||||
Xxxxxx Xxxxxxxxxxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxxx Xxxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxxx Xxx Xxxxxxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxxxx Xxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxx Xxxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxx Xxxxxx |
944.84 | 10,038.19 | — | |||||||||
Xxxxx Xxxxxxxx, Xx. |
448.00 | 4,759.64 | — | |||||||||
Xxx Xxxxxx |
405.00 | 4,302.80 | — | |||||||||
Xxx Xxxxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxx Xxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx Xxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx Xxxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx Xxxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx Xxxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxxxxxx Xxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx Xxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxxxx Xxxxxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx XxXxxxxx |
283.45 | 3,011.46 | — | |||||||||
Xxxxx Xxxxx |
236.21 | 2,509.55 | — | |||||||||
Xxxxx Xxxxxxxxx |
236.21 | 2,509.55 | — | |||||||||
Xxxxxx Xxxxxxxxxxxx |
209.00 | 2,220.46 | — | |||||||||
Xxxxxxxx Xxxxxx |
200.00 | 2,124.84 | — | |||||||||
Xxxxxxx Xxxxxxxxxx Xxx |
168.00 | 1,784.86 | — | |||||||||
GES
Restricted Stock Plan Distributions
Restricted Stock Plan Distributions
| Distributed at Close of Reverse Merger | ||||||||||||
| Restricted Stock | Cash | |||||||||||
| Allocated Shares | Consideration | # of Shares ($5.00) | ||||||||||
Investor Payouts |
||||||||||||
Xxxxxxx Xxxxxxxxxxxx |
151.00 | 1,604.26 | — | |||||||||
Xxxxx Xxxx |
109.00 | 1,158.04 | — | |||||||||
Xxxxxx Xxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxx Xxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxxxxx Xxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxxxxxx Xxxxxxxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxx Xxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxx XxXxxxxx |
100.00 | 1,062.42 | — | |||||||||
Jo Xxxx XxXxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxx Xxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxxxx Xxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxx Xxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxx Xxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxx Xxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxxx Xxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxx Isla |
100.00 | 1,062.42 | — | |||||||||
Xxxxx XxXxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxxx Xxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxx Xxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxx Xxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxx Xxxxxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxxxxxx Xxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxx Xxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxxx |
100.00 | 1,062.42 | — | |||||||||
Xxxxxx Xxxxxx |
73.00 | 775.57 | — | |||||||||
Xxxx Xxxxxx |
73.00 | 775.57 | — | |||||||||
Xxxxxx Xxxxxx |
59.00 | 626.83 | — | |||||||||
Xxxxx Xxxxxx |
59.00 | 626.83 | — | |||||||||
Xxxxxxx Xxxxxxx |
48.00 | 509.96 | — | |||||||||
Xxxxxxxx Xxxxxx |
48.00 | 509.96 | — | |||||||||
Xxxxx Xxxxxxx |
45.00 | 478.09 | — | |||||||||
Xxxxx Xxxx |
42.00 | 446.22 | — | |||||||||
Xxxxx Xxxxxxxxxxxx |
42.00 | 446.22 | — | |||||||||
Xxxxxxxxx Xxxxx |
36.00 | 382.47 | — | |||||||||
Xxx Xxxxxxxx |
472.42 | 5,019.10 | — | |||||||||
Xxxxxx Xxxxxxxxxx |
283.45 | 3,011.46 | — | |||||||||
XxxxXxxx Xxxxx |
94.48 | 1,003.82 | — | |||||||||
Xxxxxxx Xxxxxx |
94.48 | 1,003.82 | — | |||||||||
Xxxxx Xxxxx |
283.45 | 3,011.46 | — | |||||||||
| 2,000,000.00 | $ | 11,623,929.27 | 1,924,889.11 | |||||||||
EXHIBITS
Exhibit A
|
Form of Notes | |
Exhibit B
|
Form of Warrants | |
Exhibit C
|
Registration Rights Agreement | |
Exhibit D
|
Form of Pledge Agreement | |
Exhibit E
|
Form of Security Agreement | |
Exhibit F
|
Form of Guaranty | |
Exhibit G
|
Irrevocable Transfer Agent Instructions | |
Exhibit H
|
Form of Xxxxxxxxxx Hyatt & Xxxxxx, P.C. Opinion | |
Exhibit I
|
Form of Secretary’s Certificate | |
Exhibit J
|
Form of Officer’s Certificate | |
Exhibit K
|
Xxxxx Fargo Term Sheet | |
Exhibit L
|
Form of Subordination Agreement | |
Exhibit M
|
Share Purchase Agreement | |
Exhibit N
|
Pro Forma Capitalization and Contingent Liabilities | |
Exhibit O
|
Form of Non-Competition and Non-Solicitation Agreements | |
Exhibit P
|
Preferred Stock Securities Purchase Agreement | |
Exhibit Q
|
Common Stock Securities Purchase Agreement | |
Exhibit R
|
Form of Joinder Agreement | |
Exhibit S
|
Forms of Pay-Off Letters |
Exhibit A
Form of Notes
[See Exhibit 10.4 to this Form 8-K]
Exhibit B
Form of Warrants
[See Exhibit 4.1 to this Form 8-K]
Exhibit C
Registration Rights Agreement
[See Exhibit 4.4 to this Form 8-K]
Exhibit D
Form of Pledge Agreement
[See Exhibit 10.6 to this Form 8-K]
Exhibit E
Form of Security Agreement
[See Exhibit 10.7 to this Form 8-K]
Exhibit F
Form of Guaranty
[See Exhibit 10.5 to this Form 8-K]
Exhibit G
Form of Irrevocable Transfer Agent Instructions
(see attached)
TRANSFER AGENT INSTRUCTIONS
March 31, 2006
Corporate Stock Transfer
0000 Xxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxx
0000 Xxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxx
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement, dated as of March 31, 2006
(the “Agreement”), by and among Global Employment Solutions, Inc., a Colorado corporation, and the
investors named on the Schedule of Buyers attached thereto (collectively, the “Holders”), pursuant
to which Global Employment Holdings, Inc., a Delaware corporation (the “Company”), (x) is issuing
to the Holders (i) senior convertible notes (the “Notes”), which are convertible into shares of the
common stock of the Company, par value $0.001 per share (the “Common Stock”), and (ii) warrants
(the “Warrants”), which are exercisable to purchase shares of Common Stock.
This letter shall serve as our authorization and direction to you (provided that you are the
transfer agent of the Company at such time), subject to any stop transfer instructions that we may
issue to you from time to time, if at all:
(i) to issue shares of Common Stock upon conversion of the Notes (the “Conversion Shares") to or
upon the order of a Holder from time to time upon delivery to you of a properly completed and duly
executed Conversion Notice, in the form attached hereto as Exhibit I, which has been
acknowledged by the Company as indicated by the signature of a duly authorized officer of the
Company thereon;
(ii) to issue shares of Common Stock upon exercise of the Warrants (the “Warrant Shares") to or upon the
order of a Holder from time to time upon delivery to you of a properly completed and duly executed
Exercise Notice, in the form attached hereto as Exhibit II, which has been acknowledged by
the Company as indicated by the signature of a duly authorized officer of the Company thereon.
You acknowledge and agree that so long as you have previously received (a) written
confirmation from the General Counsel of the Company (or its outside legal counsel) that either (i)
a registration statement covering resales of the Conversion Shares or the Warrant Shares has been
declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act
of 1933, as amended (the “1933 Act”), or (ii) that sales of the Conversion Shares and the Warrant
Shares may be made in conformity with Rule 144 under the 1933 Act, and (b) if applicable, a copy of
such registration statement, then, within three (3) business days after your receipt of a
Conversion Notice or Exercise Notice, you shall issue the certificates representing the Conversion
Shares and/or the Warrant Shares, as applicable, and
such certificates shall not bear any legend restricting transfer of the Conversion Shares or
the Warrant Shares thereby and should not be subject to any stop-transfer restriction;
provided, however, that if such Conversion Shares and Warrant Shares are not
registered for resale under the 1933 Act or able to be sold under Rule 144, then the certificates
for such Conversion Shares and/or Warrant Shares shall bear the following legend:
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER AND
REASONABLY ACCEPTABLE TO THE ISSUER, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES. THIS INSTRUMENT IS SUBJECT TO THE TERMS
OF A SUBORDINATION AGREEMENT BY [HOLDER] IN FAVOR OF XXXXX FARGO
BANK, NATIONAL ASSOCIATION, ACTING THROUGH ITS XXXXX FARGO BUSINESS
CREDIT OPERATING DIVISION, DATED AS OF MARCH 31, 2006.
A form of written confirmation from the General Counsel of the Company or the Company’s
outside legal counsel that a registration statement covering resales of the Conversion Shares and
the Warrant Shares has been declared effective by the SEC under the 1933 Act is attached hereto as
Exhibit III.
Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions. Should you have any questions concerning this matter, please
contact me at (000) 000-0000.
| Very truly yours, | ||||
| GLOBAL EMPLOYMENT HOLDINGS, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
ACKNOWLEDGED AND AGREED TO
this 31st day of March, 2006
| CORPORATE STOCK TRANSFER, INC. | ||||
By: |
||||
| Title: | ||||
| Enclosures | ||
cc:
|
Amatis Limited | |
| Xxxxxxx X. Xxxxx, Esq. | ||
EXHIBIT I
CONVERSION NOTICE
Reference is made to the Senior Secured Convertible Note (the “Note”) issued to the undersigned by
Global Employment Holdings, Inc. (the “Company”). In accordance with and pursuant to the Note, the
undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note
indicated below into shares of Common Stock, $0.001 par value per share (the “Common Stock”), as of
the date specified below.
| Date of Conversion: | ||||
| Aggregate Conversion Amount to be converted: | ||||
Please confirm the following information:
| Conversion Price: | ||||
| Number of shares of Common Stock to | ||||
| be issued: | ||||
Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:
| Issue to: | ||||
| Facsimile Number: | ||||
| Authorization: | ||||
| By: | ||||
| Title: | ||||
| Dated: | ||
| Account Number: | ||||
| (if electronic book entry transfer) | ||||
| Transaction Code Number: | ||||
| (if electronic book entry transfer) | ||||
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby directs Corporate Stock
Transfer to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated ___, 2006 from the Company and acknowledged and agreed
to by Corporate Stock Transfer.
| GLOBAL EMPLOYMENT HOLDINGS, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
EXHIBIT II
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
The undersigned holder hereby exercises the right to purchase of the shares
of Common Stock (“Warrant Shares”) of Global Employment Holdings, Inc., a Delaware corporation (the
“Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:
a “Cash Exercise” with respect to Warrant
Shares;
and/or
a “Cashless Exercise” with respect to Warrant
Shares.
2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the
Aggregate Exercise Price in the sum of $ to the Company in accordance with the
terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder Warrant
Shares in accordance with the terms of the Warrant.
Date: __, ______
| Name of Registered Holder | ||||
By: |
||||
| Title: | ||||
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs Corporate Stock
Transfer to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated ___, 2006 from the Company and acknowledged and agreed to
by Corporate Stock Transfer.
| GLOBAL EMPLOYMENT HOLDINGS, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
OF REGISTRATION STATEMENT
[Transfer Agent]
[Address]
Attention:
[Address]
Attention:
Re: Global Employment Holdings, Inc.
Ladies and Gentlemen:
[We are][I am] counsel to Global Employment Holdings, Inc., a Delaware corporation (the
"Company”), and have represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities Purchase Agreement”) entered into by and among the Global Employment
Solutions, Inc., a Colorado corporation, and the buyers named therein (collectively, the “Holders”)
pursuant to which the Company issued to the Holders senior convertible notes (the “Notes”)
convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”) and
three series of warrants exercisable for shares of Common Stock (the “Warrants”). Pursuant to the
Securities Purchase Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the “Registration Rights Agreement”) pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the Notes and the
shares of Common Stock issuable upon exercise of the Warrants, under the Securities Act of 1933, as
amended (the “1933 Act”). In connection with the Company’s obligations under the Registration
Rights Agreement, on ___, 200_, the Company filed a Registration Statement on Form S-1
(File No. 333- ) (the “Registration Statement”) with the Securities and Exchange
Commission (the “SEC”) relating to the Registrable Securities which names each of the Holders as a
selling stockholder thereunder.
In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has
advised [us][me] by telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the Registration Statement.
This letter shall serve as our standing instruction to you that the shares of Common Stock are
freely transferable by the Holders pursuant to the Registration Statement. You need not require
further letters from us to effect any future legend-free issuance or reissuance of shares of Common
Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
[ ___], 2006.
| Very truly yours, | ||||
| [ISSUER’S COUNSEL] | ||||
| By: | ||||
CC: [LIST NAMES OF HOLDERS] |
||||
Exhibit H
Form of Xxxxxxxxxx Xxxxx & Xxxxxx, P.C. Opinion
(see attached)
March 31, 2006
The Buyers Listed on the Schedule of Buyers
Attached to the Securities Purchase Agreement (as defined below)
Attached to the Securities Purchase Agreement (as defined below)
| RE: | Notes Securities Purchase Agreement, dated as of March 31, 2006, by and among Global Employment Solutions, Inc., a Colorado corporation (“Global”), and the Investors listed on the Schedule of Buyers attached thereto (the “Securities Purchase Agreement”) |
Ladies and Gentlemen:
We have acted as counsel to Global Employment Holdings, Inc. (“Holdings”), Global
and the Subsidiaries in connection with the Securities Purchase Agreement. This opinion is
delivered pursuant to Section 7(c) of the Securities Purchase Agreement. Capitalized terms used
and not defined herein have the meanings given such terms in the Securities Purchase Agreement.
In addition to the Securities Purchase Agreement, we have reviewed the following documents,
each dated as of the date hereof:
| 1. | the Notes; | |
| 2. | the Warrants; | |
| 3. | the Registration Rights Agreement; | |
| 4. | the Subordination Agreement; | |
| 5. | the Pledge Agreement; | |
| 6. | the Security Agreement; | |
| 7. | the Guaranty; and | |
| 8. | the Joinder Agreement. |
The Securities Purchase Agreement and the documents referred to in paragraphs 1-8 above
are referred to as the “Transaction Documents.”
March 31, 2006
Page 2
Page 2
We have also examined originals or copies of the certificate or articles of
incorporation and bylaws of Holdings, Global and each of the Subsidiaries, resolutions of the
boards of directors of Holdings, Global and each of the Subsidiaries, and certificates of public
officials concerning the legal existence, qualification or good standing of Holdings, Global and
each of the Subsidiaries in various jurisdictions. As to all factual matters material to the
opinions set forth herein, we have (with your permission and without any investigation or
independent confirmation) relied upon, and assumed the accuracy of, such certificates, corporate
records, searches and other documents (including certificates of responsible officers of Holdings,
Global and the Subsidiaries as to matters of fact) with respect to the facts stated therein.
Whenever our opinion with respect to the existence or absence of facts is indicated to be
based on our knowledge or awareness, we are referring to the actual knowledge of Xxxxxxx Xxxxxxx,
Xxxx Xxxxx, Xxxxxxx Xxxxxx and Xxxxxx Xxxxxxxx, the only Xxxxxxxxxx Hyatt & Xxxxxx, P.C. attorneys
who have given substantive attention to matters concerning the Transaction Documents during the
course of such representation, which knowledge has been obtained by such attorneys in their
capacity as such. We are not generally familiar with the business, records, transactions or
activities of Holdings, Global or the Subsidiaries, Our knowledge of the business, records,
transactions and activities of Holdings, Global and the Subsidiaries is limited to the information
which has been brought to our attention by officers of Holdings, Global and the Subsidiaries in
connection with this opinion letter or by those corporate records and agreements that were revealed
to us by Holdings, Global and the Subsidiaries in response to our inquiries. While nothing has
come to our attention which has led us to conclude that such information, taken as a whole, is
materially inaccurate, we make no representation concerning the scope or adequacy of such review or
such inquiries or concerning the accuracy or completeness of the responses to such inquiries.
Without limiting the foregoing, we have relied, as to factual matters, without investigation, on
the certificates of officers of Holdings, Global and the Subsidiaries delivered to the Buyers
pursuant to Transaction Documents, and the Certificate of Officers of Holdings, Global and the
Subsidiaries attached as Schedule A (the “Certificate”).
In rendering the opinions expressed below, we have assumed, with your permission and without
independent verification, that:
(a) the signatures of persons signing all documents in connection with which this opinion is
rendered are genuine and authorized (other than those of Holdings, Global and the Subsidiaries on
the Transaction Documents);
(b) all documents submitted to us as originals or duplicate originals are authentic;
March 31, 2006
Page 3
Page 3
(c) all documents submitted to us as copies, whether certified or not, conform to authentic
original documents;
(d) all parties to the documents reviewed by us (other than Holdings and Global) have full
power and authority to execute, to deliver and to perform their obligations under such documents
and under the documents required or permitted to be delivered and performed thereunder, and all
such documents have been duly authorized by all necessary action by the parties thereto (other than
Holdings and Global as aforesaid), have been duly executed and delivered by such other parties, and
are valid, binding and enforceable obligations of such other parties;
(e) value has been given in consideration for the grant of security interests in the
collateral described in and intended to be encumbered by the Transaction Documents, and the
applicable entity that is granting a security interest in collateral has rights in such collateral;
and
(f) all of the conditions precedent to the closing of the transactions contemplated in the
Transaction Documents have been satisfied in full or waived by the Buyers.
Based upon the foregoing and subject to the qualifications stated herein, we are of the
opinion that, as of the date hereof:
1. Each of Holdings, Global and each Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation. Holdings and
Global each has the requisite corporate power to own, lease and operate its properties and to
conduct its business as presently conducted. Each of Holdings, Global and each Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in each jurisdiction in
which such qualification is necessary to conduct its business.
2. Each of Holdings and Global has the requisite corporate power and authority to execute,
deliver and perform all of its obligations under the Transaction Documents to which it is a party,
including the issuance of the Notes, the Conversion Shares, the Warrants and the Warrant Shares in
accordance with the terms thereof. The execution and delivery of the Transaction Documents by
Holdings and Global and the consummation of the transactions contemplated therein (including
without limitation, the issuance and sale of the Notes and Warrants) have been duly authorized by
the Board of Directors of Holdings and Global, and no further consent or authorization of Holdings,
Global, either of their Boards of Directors or either of their stockholders is required therefore.
The Transaction Documents to which it is a party have been duly executed and delivered by each of
Holdings and Global. The Transaction Documents to which it is a party constitute valid and
binding obligations of Holdings, Global, or each Subsidiary, as
March 31, 2006
Page 4
Page 4
the case may be, enforceable
against Holdings, Global or each Subsidiary, as the case may be, in accordance with their
respective terms.
3. The execution, delivery and performance by each of Holdings, Global and each of the
Subsidiaries of the Transaction Documents to which it is a party, including without limitation, the
issuance of the Notes and the Warrants, the Conversion Shares and the Warrant Shares, and the
consummation by Holdings and Global of the transactions contemplated by the Transaction Documents
and the compliance by Holdings and Global with the terms thereof do not and will not violate,
conflict with or constitute a default (or an event which, with the giving of notice or lapse of
time or both, constitutes or would constitute a default) under, give rise to any right of
termination, cancellation or acceleration under, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance (other than pursuant to the
Transactions Documents) upon or with respect to any of its respective properties, (a) the
Certificate of Incorporation or By-laws of Holdings or Global; (b) any agreement, note, lease,
mortgage, deed or other instrument listed on Annex I to Schedule A attached hereto to which
Holdings or Global is a party or by which either Holdings or Global is bound or affected and that
Holdings and Global have informed us are the only material contracts of Holdings, Global and the
Subsidiaries and will be filed on a Form 8-K filed by Holdings with the Securities and Exchange
Commission within two business days of the date hereof (the “Publicly Filed Documents”); or (c) any
statute, law, rule or regulation of the United States, the State of Colorado, the State of Delaware
or the State of New York applicable to Holdings or Global or any order, writ, injunction or decree
known to us.
4. The Notes and Warrants, when issued pursuant to the Securities Purchase Agreement, the
Conversion Shares when issued pursuant to the Notes and the Warrant Shares when issued pursuant to
the Warrants will be duly authorized and validly issued, fully paid and nonassessable, and free of
any all liens and charges and preemptive or similar rights contained in Holdings’s Certificate of
Incorporation or Bylaws or any agreement, note, lease, publicly filed mortgage deed or other
instrument to which Holdings is a party or by which Holdings is bound that is a Publicly Filed
Document. The Conversion Shares and the Warrant Shares have been duly and validly authorized and
reserved for issuance by all proper corporate action.
5. As of the date hereof and before giving effect to the issuance of the securities
contemplated by the Transaction Documents, the authorized capital stock of Holdings consists of
75,000,000 shares of Common Stock, par value
$0.0001 per share, of which as of the date hereof, 180,927.835 are issued and outstanding, and
10,000,000 shares of preferred stock, par value $0.0001 per share, of which as of the date hereof,
none are issued and outstanding. None of such Common Stock is subject to preemptive rights or other
rights of the stockholders of the Company pursuant to the Certificate of Incorporation or the
By-laws or under the Delaware
March 31, 2006
Page 5
Page 5
General Corporation Law or pursuant to any agreement, note, lease,
mortgage deed or other instrument to which the Company is a party or by which the Company is bound
that is a Publicly Filed Document. Neither Holdings’s Certificate of Incorporation or Bylaws, nor
any Publicly Filed Documents, contain anti-dilution or similar provisions that will be triggered by
the issuance of the Notes, the Conversion Shares, the Warrants or the Warrant Shares. To our
knowledge, there are no other securities or instruments of the Company containing anti-dilution or
similar provisions that will be triggered by the issuance of the Notes, the Conversion Shares, the
Warrants or the Warrant Shares.
6. Assuming the accuracy of the representations of the Buyers in Article 2 of the Securities
Purchase Agreement, the offer and sale of the Notes and the Warrants in accordance with the
Securities Purchase Agreement is exempt from the registration requirements of the Securities Act of
1933, as amended (the “Securities Act”). Assuming the accuracy of the representations of
the Buyers in Article 2 of the Securities Purchase Agreement and no change in applicable Federal or
state securities laws from those in effect on the date hereof, the issuance of the Conversion
Shares and the Warrant Shares in accordance with the Transaction Documents will be exempt from the
registration requirements of the Securities Act, provided, we give no opinion with respect to
circumstances where the issuance of the Conversion Shares or the Warrant Shares could be integrated
with any future offering of Holdings’s securities.
7. No authorization, approval, consent, filing, or other order of any federal or state
governmental body, regulatory agency, self-regulatory organization or stock exchange or market, or
the stockholders of Holdings or Global, or any court, or to our knowledge, any third party is
required to be obtained by Holdings or Global to enter into and perform its obligations under the
Transaction Documents or for the issuance and sale of the Notes, the Conversion Shares, the
Warrants or the Warrant Shares in accordance with the Transaction Documents, or for the exercise of
any rights and remedies under any Transaction Documents except (i) the filing of a Form D under
Regulation D of the Securities Act of 1933, as amended, (ii) the filing of a Form 8-K pursuant to
the Securities Exchange Act of 1934, as amended, and (iii) the registration statement and related
state securities law filings required by the Registration Rights Agreement.
8. To our knowledge, no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental agency or
self-regulatory organization is pending or threatened against Holdings or Global or any of the
Subsidiaries or any of the properties or assets of Holdings, Global or any Subsidiary.
9. Holdings and its Board of Directors have taken all necessary action, if any, to render
inapplicable any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-
March 31, 2006
Page 6
Page 6
takeover provision under the Company’s
Certificate of Incorporation or provisions of the Delaware General Corporation Law applicable to
the Buyers and their affiliates as a result of the Buyers and Holdings fulfilling their obligations
or exercising their rights under the Transaction Documents, including without limitation,
Holdings’s issuance of the Notes and the Warrants on the date hereof (and the shares of Common
Stock issuable upon conversion or exercise thereof).
10. Holdings is not an “investment company” or an entity controlled by an “investment
company,” as such term is defined in the Investment Company Act of 1940, as amended.
11. The Pledge Agreement and the Security Agreement (collectively, the “Security
Documents”) each create a valid security interest in favor of the Collateral Agent in the
Collateral purported to be covered thereby as security for the obligations purported to be secured
thereby. With respect to that portion of the Collateral in which a security interest may be
perfected by the filing of a financing statement in the State of Colorado (for all such Collateral
in the State of Colorado, collectively, the “UCC Collateral”), the proper place to file
such financing statement is in the Office of the Secretary of State for the State of Colorado, and
no filing or recordation in any other place is necessary under the Uniform Commercial Code
currently in effect in the State of Colorado (the “Colorado UCC”) to perfect a security
interest in the UCC Collateral. The financing statement attached hereto as Schedule B is
sufficient upon filing to perfect the Collateral Agent’s security interest in the UCC Collateral
under the Colorado UCC. With respect to Holdings and the Subsidiaries we advise you that the
perfection and effect of perfection of the security interests created by the Security Documents
which may be perfected by filing will be governed by laws other than those of the State of
Colorado. Although we express no opinion as to such laws, based solely on our review of the
Commerce Clearing House, Inc. Secured Transactions Guide (as supplemented to date), the proper
place to file a security interest in collateral owned by Holdings or a Subsidiary is in the Office
of the Secretary of State (or state equivalent) of the state in which Holdings or such Subsidiary
is incorporated, to the extent such security interest may be perfected by the fling of a financing
statement, and upon such filing such security interests
shall be perfected.
12. The Pledged Stock (as defined in the Pledge Agreement) has been duly authorized and
validly issued, is fully paid and nonassessable and constitutes 100% of the issued and outstanding
shares of capital stock of the Person issuing such Pledged Stock.
13. The sale of the Notes, the use of the proceeds thereof and the other transactions
contemplated thereby or by the other Transaction Documents will not violate or be inconsistent with
the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System of
the United States.
March 31, 2006
Page 7
Page 7
Our opinions are subject to the following further qualifications:
(a) Our opinions are subject to the effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or other similar laws.
(b) The binding effect and enforceability of the Transaction Documents and the availability of
injunctive relief or other equitable remedies thereunder are subject to the effect of general
principles of equity (regardless of whether enforcement is considered in proceedings at law or in
equity).
(c) The binding effect and the enforceability of the Transaction Documents are subject to the
effect of laws and judicial decisions which have imposed duties and standards of conduct
(including, without limitation, obligations of good faith, fair dealing and reasonableness and any
obligation to demonstrate that enforcement of provisions that are burdensome on a debtor is
reasonably necessary for the protection of the creditor) upon creditors or secured creditors.
(d) In addition, certain other of the remedial, waiver and other provisions of the Transaction
Documents may not be enforceable, in whole or part, but the inclusion of such provisions does not
affect the validity of the Transaction Documents, taken as a whole, and such Transaction Documents
together with the Credit Agreement, taken as a whole and together with remedies available under
applicable law, contain (in our experience) customary provisions for the practical realization of
the benefits of the security created thereby.
(e) Except as set forth in paragraphs 11 and 12, we express no opinion as to the creation,
attachment, or perfection of any security interest.
(f) Notwithstanding certain language of the Transaction
Documents, you may be limited to recovering only reasonable expenses with respect to the
taking, holding, preparing, selling, leasing and the like of collateral, only reasonable attorneys’
fees and legal expenses and compensation only for actual funding losses, increased costs or yield
protection.
(g) We express no opinion as to, or the effect or applicability of, any state securities or
“blue sky” laws or any laws other than the laws of the State of Colorado, the laws of the State of
New York, the Delaware General Corporation Law and the federal laws of the United States of
America.
(h) Our opinions herein regarding the creation of any security interest (including, without
limitation, any security interests in “proceeds”) are limited to the extent that the Colorado UCC
is applicable thereto, and we note that the existence, continuation and scope of any such security
interest is subject to limitations set forth in the Colorado UCC, lien avoidance powers available
under the Bankruptcy Code
March 31, 2006
Page 8
Page 8
(including without limitations Section 544, 547, and 548 thereof) and
other federal or state bankruptcy, insolvency or similar law. We express no opinion herein as to
the priority of any security interest.
(i) We express no opinion as to the creation, perfection or enforceability of security
interests in property in which it is illegal or violative of governmental rules or regulations to
grant a security interest, general intangibles that terminate or become terminable if a security
interest is granted therein, property subject to negative pledge clauses of which the Buyers have
actual knowledge, whether any UCC Collateral constitutes an uncertificated security within the
meaning of the Colorado UCC or the perfection or enforceability of any security interests in
consumer goods, and goods for which a negotiable document of title has been issued. In addition,
we express no opinion as to the enforceability of security interests in property identified to a
contract with, or in the possession of, the United States of America, any state, county, city,
municipality or other governmental body or agency.
(j) Our opinions are subject to the effect of (i) the limitations on the existence and
perfection of security interests in proceeds resulting from the operation of Section 9-315 of the
Colorado UCC; (ii) the limitations in favor of buyers imposed by Sections 9-320, 9-323 and 9-330 of
the Colorado UCC; (iii) the limitations with respect to documents, instruments and securities
imposed by Sections 9-331, 8-302 and 3-302 of the Colorado UCC; (iv) other rights of persons in
possession of money, instruments and proceeds constituting securities; and (v) Section 552 of the
Bankruptcy Code with respect to any collateral acquired by any person subsequent to the
commencement of a case against or by any person under the Bankruptcy Code.
Our opinions are limited to the specific issues addressed and are limited in all respects to
laws and facts existing on the date hereof by rendering our opinions, we do not undertake to advise
you of any changes in such laws or facts which may occur after the date hereof.
This letter is furnished to you pursuant to the Amendment in connection with the transactions
contemplated by the Transaction Documents and is not to be used, circulated, quoted or otherwise
relied upon by any other person or entity or for any other purpose without our prior written
consent.
Very truly yours,
Schedule A
CERTIFICATE
The undersigned, being the Chief Executive Officer and President of each of Global Employment
Holdings, Inc., a Delaware corporation (“Holdings”), Global Employment Solutions, Inc., a
Colorado corporation (the “Company”), and each of their subsidiaries, does hereby certify
for purposes of opinions to be rendered by Xxxxxxxxxx Xxxxx & Xxxxxx, P.C. in connection with the
Notes Securities Purchase Agreement, dated as of March 31, 2006, by and among the Company and the
Investors listed on the Schedule of Buyers attached thereto (the “Securities Purchase
Agreement”) Capitalized terms used herein have the meanings specified in the Securities
Purchase Agreement:
1. The execution, delivery and performance by each of Holdings, Global and each of the
Subsidiaries of the Transaction Documents to which it is a party, including without limitation, the
issuance of the Notes and the Warrants, the Conversion Shares and the Warrant Shares, and the
consummation by Holdings and the Company of the transactions contemplated by the Transaction
Documents and the compliance by Holdings and the Company with the terms thereof do not and will not
result in or require the creation of any lien, security interest or other charge or encumbrance
(other than pursuant to the Transactions Documents) upon or with respect to any of its respective
properties.
2. Annex I hereto contains a list of all agreements, notes, leases, mortgages, deeds or other
instruments to which Holdings or the Company is a party or by which either Holdings or the Company
is bound or affected that are the only material contracts of Holdings, Global and the Subsidiaries
and that will be filed on a Form 8-K filed by Holdings with the Securities and Exchange Commission
within two business days of the date hereof.
3. As of the date hereof and before giving effect to the issuance of the securities
contemplated by the Transaction Documents, there are 180,927.835 shares of Common Stock outstanding
and no shares of Preferred Stock outstanding. There are no other securities or instruments of the
Company containing anti-dilution or similar provisions that will be triggered by the issuance of
the Notes, the Conversion Shares, the Warrants or the Warrant Shares.
4. No authorization, approval, consent, filing, or other order of any third party is required
to be obtained by Holdings or the Company to enter into and perform its obligations under the
Transaction Documents or for the issuance and sale of the Notes, the Conversion Shares, the
Warrants or the Warrant Shares in
accordance with the Transaction Documents, or for the exercise of
any rights and remedies under any Transaction Documents.
5. No action, suit, proceeding, inquiry or investigation before or by any court, public board
or body or any governmental agency or self-regulatory organization is pending or threatened against
Holdings or the Company or any of the Subsidiaries or any of the properties or assets of Holdings,
the Company or any Subsidiary.
| Dated: March 31, 2006 | ||||
| Xxxxxx Xxxxx, CEO of Global Employment | ||||
| Holdings, Inc., Global Employment Solutions, Inc. and each of the Subsidiaries | ||||
Annex I
Subordinated Promissory Note Agreement, dated as of July 29, 1988
Warrant Purchase Agreement, dated as of March 13, 1998, as amended, among Global Personnel
Services, Inc., KRG Capital Partners, LLC, KRG Capital Investments IV, LLC, Seacoast Capital
Partners Limited Partnership and Pacific Mezzanine Fund, L.P.
Note Purchase Agreement, dated as of March 13, 1998, among Seacoast Capital Partners Limited
Partnership, Pacific Mezzanine Fund, L.P., Temporary Placement Service, Inc., Excell Personnel
Services Corporation and Global Personnel Services, Inc.
Master Investment Agreement, dates as of November 15, 2001, as amended, among GES, GES’
subsidiaries, Global Investment I, LLC, members of Global Investment I, LLC, and listed individuals
and institutions
2002 Restricted Stock Plan, accompanied by individual 2002 Restricted Stock Purchase Agreements
between GES and named purchasers
Credit and Security Agreement, dated as of March 7, 2002, as amended, between GES and Xxxxx Fargo
Bank, National Association, as successor in interest to Xxxxx Fargo Business Credit, Inc.
Management Agreement with KRG Capital, LLC and affiliates
Schedule B
[insert UCC]
| UCC FINANCING STATEMENT | ||||||||
| FOLLOW INSTRUCTIONS (front and back) CAREFULLY | ||||||||
| A. NAME & PHONE OF CONTACT AT FILER [optional] | ||||||||
| Xxxxxxx Xxxxx 000-000-0000 | ||||||||
| B. SEND ACKNOWLEDGMENT TO: (Name and Address) | ||||||||
| Xxxxxxx Xxxx & Xxxxx LLP | ||||||||
| 000 Xxxxx Xxxxxx | ||||||||
| Xxx Xxxx, XX 00000 | ||||||||
| xxxxxxx.xxxxx@xxx.xxx | ||||||||
| THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY | ||||||||
| 1. DEBTOR’S EXACT FULL LEGAL NAME-insert only one debtor name(1a or 1b) — do not abbreviate or combine names | |||||||||||||||||||||||||
| 1a. ORGANIZATION’S NAME | |||||||||||||||||||||||||
| Global Employment Solutions, Inc. | |||||||||||||||||||||||||
| OR | 1b. INDIVIDUAL’S LAST NAME | FIRST NAME | MIDDLE NAME | SUFFIX | |||||||||||||||||||||
| 1c. MAILING ADDRESS | CITY | STATE | POSTAL CODE | COUNTRY | |||||||||||||||||||||
| 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 | Xxxxxxxxx | XX | 00000 | ||||||||||||||||||||||
| 1d. SEE INSTRUCTIONS | ADD’L INFO RE ORGANIZATION DEBTOR | 1e. TYPE OF ORGANIZATION Corporation | 1f. JURISDICTION OF
ORGANIZATION Colorado |
1g. ORGANIZATIONAL ID #, if any 19981028215 |
o NONE | ||||||||||||||||||||
| 2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME — insert only one debtor name (2a or 2b) — do not abbreviate or combine names | |||||||||||||||||||||||||
| 2a. ORGANIZATION’S NAME |
|||||||||||||||||||||||||
| OR | 2b. INDIVIDUAL’S LAST NAME |
FIRST NAME | MIDDLE NAME | SUFFIX | |||||||||||||||||||||
| 2c. MAILING ADDRESS |
CITY | STATE | POSTAL CODE | COUNTRY | |||||||||||||||||||||
| 2d. SEE INSTRUCTIONS | ADD’L INFO RE ORGANIZATION DEBTOR | 2e. TYPE OF ORGANIZATION | 2f. JURISDICTION OF ORGANIZATION | 2g. ORGANIZATIO NAL ID #, if any | o NONE | ||||||||||||||||||||
| 3. SECURED PARTY’S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P)-insert only one secured party name (3a or 3b) | |||||||||||||||||||||||||
| 3a. ORGANIZATION’S NAME | |||||||||||||||||||||||||
| Amatis Limited, as Collateral Agent | |||||||||||||||||||||||||
| OR | 3b. INDIVIDUAL’S LAST NAME |
FIRST NAME | MIDDLE NAME | SUFFIX | |||||||||||||||||||||
| 3c. MAILING ADDRESS | CITY | STATE | POSTAL CODE | COUNTRY | |||||||||||||||||||||
| Xxx Xxxxxxxx Xxxx | Xxxxxxxxx | XX | 00000 | ||||||||||||||||||||||
4. This FINANCING STATEMENT covers the following collateral:
All assets, including but not limited to all accounts, chattel paper, commercial tort claims, deposit accounts, documents, equipment, fixtures, general intangibles (including,
without limitation, all payment intangibles), goods, instruments (including, without limitation, promissory notes), inventory, investment property, copyrights, patents and
trademarks and licenses, letter-of-credit rights, supporting obligations, proceeds (including cash and noncash proceeds) and products of any of the foregoing collateral.
| 5. ALTERNATIVE DESIGNATION [if applicable]: o LESSEE/LESSOR o CONSIGNEE/CONSIGNOR o BAILEE/XXXXXX oSELLER/BUYER o AG. LIEN o NON-UCC FILING | |||
6. o This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL
ESTATE RECORDS Attach Addendum [If applicable]
|
7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE] [optional] o All Debtors o Debtor 1 o Debtor 2 | ||
8. OPTIONAL FILER REFERENCE DATA
|
F#156838 | ||
CM# 003602.0011 Filed with: CO — Secretary of State
|
A#249266 | ||
FILING
OFFICE COPY — UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02) |
|||
Exhibit I
Form of Secretary’s Certificate
(see attached)
SECRETARY’S CERTIFICATE
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
Pursuant to the provisions of (i) the Preferred Stock Securities Purchase Agreement (the
“Preferred Agreement”), dated as of March , 2006, among Global Employment Solutions,
Inc. (“GES”) and the parties listed on the Schedule of Buyers attached thereto, (ii) the
Common Stock Securities Purchase Agreement (the “Common Agreement”), dated as of March
, 2006, among GES and the parties listed on the Schedule of Buyers attached thereto, and (iii)
the Notes Securities Purchase Agreement (the “Notes Agreement,” and collectively with the
Preferred Agreement and the Common Agreement, the “Agreements”), dated as of March ,
2006, among GES and the parties listed on the Schedule of Buyers attached thereto, and with the
understanding that capitalized terms used herein and not otherwise defined herein shall have the
meaning assigned to them in the Agreements, the undersigned, in accordance with Section 7(g) of the
Agreements, hereby certifies in his capacity as Secretary of GES as follows:
1. Attached hereto as Exhibit A is a true, correct, and complete copy of
the Articles of Incorporation of GES, which Articles of Incorporation are in full force and effect
as of the date hereof and have not been amended or rescinded;
2. Attached hereto as Exhibit B is a true, correct, and complete copy of
the Bylaws of GES, which Bylaws are in full force and effect as of the date hereof and have not
been amended or rescinded;
3. Each person listed on Exhibit C has been duly elected or appointed to
the position(s) indicated opposite his name and is duly authorized to sign the Agreements and each
of the Transaction Documents on behalf of GES, and the signature appearing opposite such person’s
name is such person’s genuine signature; and
4. Attached hereto as Exhibit D is a true and correct copy of the
resolutions of the Board of Directors of GES, authorizing the execution, delivery and performance
of the Agreements and all other related matters, adopted by the Board of Directors of GES, and such
resolutions are in full force and effect on and as of the date hereof not having been amended,
altered or repealed.
IN WITNESS WHEREOF, the undersigned has executed this Secretary’s Certificate as March ,
2006.
| Secretary |
I, Xxxxxx Xxxxx, hereby certify that Xxx Xxxxxxxxxx is the duly elected, qualified and acting
Secretary of GES and that the signature set forth above is his true signature.
| Chief Executive Officer and President |
EXHIBIT A
ARTICLES OF INCORPORATION
(See Attached)
ARTICLES OF INCORPORATION
OF
GLOBAL PERSONNEL SERVICES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned incorporator, being of the age of
eighteen years or more, desiring to organize a corporation under the Colorado Business Corporation
Act, hereby makes, signs and verifies these Articles of Incorporation.
Article I
The name of the corporation is Global Personnel Services, Inc. (the
“Corporation”).
Article II
The Corporation is to have perpetual existence.
Article III
The purpose for which the Corporation is created shall be for any lawful act or activity for
which corporations may be organized under the Colorado Business Corporation Act.
Article IV
In furtherance of the purposes set forth in Article III of these Articles of Incorporation,
the Corporation shall have and may exercise all of the rights, powers and privileges now or
hereafter conferred upon corporations organized under and pursuant to the laws of the State of
Colorado, including but not limited to the power to become a member of a limited liability company
and to enter into general partnerships, limited partnerships (whether the Corporation be a limited
or general partner), joint ventures, syndicated pools, associations and other arrangements for
carrying on one or more of the purposes set forth in Article III of these Articles of Incorporation
and in the Colorado Business Corporation Act, jointly or in common with others. In addition, the
Corporation may do everything necessary, suitable or proper for the accomplishment of any of its
corporate purposes.
Article V
A. Authorized Shares: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue Ten Million (10,000,000) shares, of which Five Million
(5,000,000) shares shall constitute Preferred Stock, $.01 par value, and Five Million (5,000,000)
shares shall constitute Common Stock, $.01 par value.
B. Preferred Stock: The Preferred Stock may be issued from time to time in one or
more classes or series. The board of directors of the Corporation shall have the authority, to the
full extent permitted by the Colorado Business Corporation Act, to designate the Preferred Stock in
one or more classes or series and to fix and determine the relative rights and preferences of such
classes or series so established, including voting, dividend, redemption, liquidation preference
and other rights.
C. Transfer Restrictions: The Corporation shall have the right, by appropriate
action, to impose restrictions upon the transfer of any shares of its capital stock, or any
interest therein, from time to time issued, provided that notice of such restrictions shall be set
forth upon the face or back of the certificates representing such shares of capital stock.
D. Preemptive Rights: Except as otherwise agreed to by the shareholders, no
shareholder of the Corporation shall have any preemptive or other right to subscribe for any
additional unissued or treasury shares of capital stock or for other securities of any class, or
for rights, warrants or options to purchase capital stock, or for securities of any kind
convertible into or exchangeable for capital stock.
Article VI
The private property of the shareholders of the Corporation shall not be subject to the
payment of corporate debts, liabilities or obligations to any extent whatsoever.
Article VII
The business and affairs of the Corporation shall be managed by a Board of Directors which
shall exercise all the powers of the Corporation, except as otherwise provided in the Bylaws of the
Corporation or by these Articles of Incorporation. There shall be at least one director or such
larger number as shall be fixed by the Bylaws of the Corporation or from time to time by amendment
of the Bylaws, but no decrease in the number of directors shall shorten the term of any incumbent
director.
2
Article VIII
The initial Board of Directors of the Corporation shall consist of four members. The name and
address of each person who is to serve as a director until the first annual meeting of the
shareholders or until his or her successor is elected and qualified is as follows:
| Xxxx X. Xxxx | 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 | |||||||
| Xxxxxx, XX 00000 | ||||||||
| Xxxxx X. Xxxxxx | 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 | |||||||
| Xxxxxx, XX 00000 | ||||||||
| Xxxxxxx X. Xxxxxxxxx 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 | ||||||||
| Xxxxxx, XX 00000 | ||||||||
| Xxx Xxxxxxxx | 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 | |||||||
| Xxxxxx, XX 00000 | ||||||||
Article IX
Cumulative voting in the election of directors is not allowed.
Article X
No contract or other transaction between the Corporation and any other person, firm,
partnership, corporation, trust, joint venture, syndicate or other entity shall be in any way
affected or invalidated solely by reason of the fact that any director or officer of the
Corporation is pecuniarily or otherwise interested in, or is a director, officer, shareholder,
employee, fiduciary or member of, such other entity or solely by reason of the fact that any
director or officer is a party to or may be interested in such contract or other transaction.
Article XI
The Corporation shall, subject to the provisions of the Bylaws of the Corporation, indemnify
any and all of its directors and officers to the fullest extent permitted by the laws of the State
of Colorado.
3
Article XII
The parties to any agreement to which the Corporation is a party shall look solely to the
assets of the Corporation for satisfaction of any liability of the Corporation in respect of all
documents, agreements, understandings and arrangements relating to the Corporation and shall have
no recourse against any of the directors, officers or shareholders of the Corporation or any of
their personal assets for the performance or payment of any obligation thereunder. No director
shall be personally liable to the Corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, provided that this provision shall not eliminate or limit the
liability of a director (i) for any breach of the director’s duty of loyalty to the Corporation or
its shareholders, (ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any act specified in Section 0-000-000 of the
Colorado Business Corporation Act; or (iv) for any transaction from which the director derived an
improper personal benefit. The protection afforded in this Article XII shall not restrict other
common law protections and rights that a director may have. The limitations on personal liability
contained in this Article XII shall continue as to a person who has ceased to be a director, and
shall inure to the benefit of his or her heirs, executors and administrators. Neither the
amendment nor repeal of this Article XII, nor the adoption of any provision of these Articles of
Incorporation inconsistent with this Article XII, shall eliminate or reduce the effect of this
Article XII in respect of any cause of action, suit or claim that, but for this Article XII, would
accrue or arise prior to such amendment, repeal or adoption.
Article XIII
In addition to the other powers now or hereafter conferred upon the Board of Directors by
these Articles of Incorporation, the Bylaws of the Corporation, or by the laws of the State of
Colorado, the Board of Directors may from time to time distribute to the shareholders in partial
liquidation a portion of the Corporation’s assets, in cash or in kind, subject to the limitations
contained in the Colorado Business Corporation Act.
Article XIV
The address of the Corporation’s initial registered and principal office is 000 Xxxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, and the name of the Corporation’s initial registered
agent at such address is Xxxxx X. Xxxxxx. The written consent of the initial registered agent to
the appointment as such is stated below.
4
Article XV
The directors shall have the power to make Bylaws and to amend or alter the Bylaws from time
to time as they deem proper for the administration and regulation of the affairs of the
Corporation.
Article XVI
The right is reserved from time to time to amend, alter or repeal any provisions of and to add
to these Articles of Incorporation in any manner now or hereafter prescribed or permitted by the
laws of the State of Colorado, and the rights of all shareholders are subject to this reservation.
Article XVII
The names and addresses of the incorporator of the Corporation is as follows:
Xxxxx X. Xxxxxx
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
* * * *
IN
WITNESS WHEREOF, the incorporator has executed these Articles of
Incorporation this 10th day of February, 1998.
| /s/ Xxxxx X. Xxxxxx | ||||
| Xxxxx X. Xxxxxx | ||||
The undersigned consents to the appointment as the initial registered agent of Global
Personnel Services, Inc.
| /s/ Xxxxx X. Xxxxxx | ||||
| Xxxxx X. Xxxxxx | ||||
5
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL PERSONNEL SERVICES, INC.
Establishing the Preferences, Limitations and Relative Rights of
Series A-1 and Series A-2 Convertible Preferred Stock
Pursuant to Section 0-000-000 of the Colorado Business Corporation Act
Series A-1 and Series A-2 Convertible Preferred Stock
Pursuant to Section 0-000-000 of the Colorado Business Corporation Act
GLOBAL PERSONNEL SERVICES, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Personnel Services, Inc.
2. The Board of Directors of the Corporation, pursuant to authority granted by the Articles of
Incorporation, duly adopted the following amendment to the Articles of Incorporation establishing
the preferences, limitations and relative rights of the Corporation’s Series A-1 and Series A-2
Convertible Preferred Stock pursuant to Section 0-000-000 of the Colorado Business Corporation Act:
Designation of Preferred Stock
One Million One Hundred Fifty Thousand (1,150,000) of the Corporation’s authorized shares of
Preferred Stock, $.01 par value, are hereby designated “Series A-1 Convertible Preferred Stock”
(the “Series A-1 Preferred”) and One Hundred Ten Thousand (110,000) of the authorized
shares of Preferred Stock are hereby designated “Series A-2 Convertible Preferred Stock” (the
“Series A-2 Preferred”). The relative rights, preferences, privileges, restrictions and
other matters relating to the Series A-1 Preferred and Series A-2 Preferred (collectively, the
“Convertible Preferred”) are as follows:
1. Dividend Rights.
Holders of Convertible Preferred, in preference to the holders of the Corporation’s Common
Stock, shall be entitled to receive such dividends and other distributions as may be declared by
the Corporation’s board of directors from time to time, when and as declared by the board of
directors, out of funds legally available therefor. Dividends shall accrue on the Series A-1
Preferred on a daily basis at the rate of 5.0% of Series A-1 Liquidation Value per annum,
and dividends shall accrue on the Series A-2 Preferred on a daily basis at the rate of 6.0% of
Series A-2 Liquidation Value per annum. To the extent not declared, accrued dividends on the
Convertible Preferred shall accumulate. No dividends or distributions shall be paid on the Common
Stock (other than dividends payable solely in shares of Common Stock) unless the Corporation shall
also declare and pay to the holders of the Convertible Preferred, at the same time that it declares
and pays such dividends to the holders of the Common Stock, dividends equal to the greater of (x)
all accrued and unpaid dividends on the Convertible Preferred or (y) the dividends which would have
been declared and paid with respect to the Common Stock issuable upon conversion of the Convertible
Preferred had all of the outstanding Convertible Preferred been converted immediately prior to the
record date for such dividend, or if no record date is fixed, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined. No dividends shall be
paid on any Series of Convertible Preferred unless equivalent dividends (determined on an
as-converted basis) are concurrently paid on all Series of Convertible Preferred.
2. Voting Rights.
Except as otherwise required by law, the Convertible Preferred shall vote with the shares of
the Common Stock of the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Convertible Preferred
shall be entitled to such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder’s aggregate number of shares of Convertible Preferred are convertible
(pursuant to Section 5 below) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of any shares of
Common Stock, (i) the holders of Series A-1 Preferred shall be entitled to be paid out of the
assets of the Corporation an amount with respect to each share of Series A-1 Preferred equal to the
sum of $5.28 (the “Original Series A Issue Price”), as appropriately adjusted for any
future stock splits, stock combinations, stock dividends or similar transactions affecting the
Series A Preferred, plus all accrued but unpaid dividends thereon (the “Series A-1 Liquidation
Value”), and (ii) the holders of Series A-2 Preferred shall be entitled to be paid out of the
assets of the Corporation an amount with respect to each share of Series A-2 Preferred equal to the
sum of $6.50 (the “Original Series A-2 Issue Price”), as appropriately adjusted for any
future stock splits, stock combinations, stock dividends or similar transactions affecting the
Series A-2 Preferred, plus all accrued but unpaid dividends thereon (the “Series A-2
Liquidation Value”). If, upon any liquidation, dissolution or
2
winding up, the assets of the
Corporation shall be insufficient to make payment in full to all holders of Convertible Preferred,
then such assets shall be distributed among the holders of Series A-1 Preferred and Series A-2
Preferred at the
time outstanding, ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
(b) At the option of the holders of two-thirds of the outstanding shares of Convertible
Preferred (the “Required Holders”), the following events shall be considered a liquidation
for purposes of this Section 3: (i) any consolidation or merger of the Corporation with or into
any other corporation or other entity, or any other corporate reorganization, in which the
stockholders of the Corporation immediately prior to such consolidation, merger or reorganization
own capital stock of the entity surviving such merger, consolidation or reorganization representing
less than fifty percent (50%) of the combined voting power of the outstanding securities of such
entity immediately after such consolidation, merger or reorganization, or any other transaction or
series of related transactions in which capital stock representing in excess of fifty percent (50%)
of the Corporation’s voting power is transferred to any single entity or group of related entities;
or (ii) a sale, lease or other disposition of all or substantially all of the assets of the
Corporation.
4. Redemption Rights.
(a) Optional Redemption. At any time or from time to time on or after March 13, 2003,
the Corporation may redeem all or any portion of the then-outstanding Convertible Preferred at a
redemption price per share equal to the greater of (x) Series A-1 Liquidation Value or Series A-2
Liquidation Value, as applicable, or (y) fair market value of the Convertible Preferred as
determined by an independent appraiser mutually acceptable to the Corporation and the Required
Holders (the “Redemption Value”).
(b) Mandatory Redemption. At any time on or after March 13, 2003, the Required
Holders may require the Corporation to redeem all but not less than all of the then-outstanding
Convertible Preferred at a redemption price per share equal to the Redemption Value by delivering
written notice of such election to the Corporation. Upon receipt of such notice of election, the
Corporation shall engage a mutually acceptable appraiser to determine the Redemption Value and
shall call the Convertible Preferred for redemption as of a date not later than 30 days after such
determination.
(c) Deferral of Redemption Obligation. Notwithstanding any other provision of this
Section 4, the Corporation shall not be obligated to redeem any shares of Convertible Preferred to
the extent that such redemption is not permitted pursuant to the terms of, or would otherwise
result in a default under, any agreement or instrument evidencing indebtedness of the Corporation
or its Subsidiaries. In the event that the Corporation shall be precluded from redeeming all
shares which it would otherwise be obligated to redeem pursuant to the provisions of this Section
4(c), the Corporation shall redeem the maximum number of shares of Convertible Preferred that it is
permitted to redeem consistent with the terms of such indebtedness and shall thereafter redeem the
balance of such shares at such time or times as such redemption shall be permitted under the terms
of such indebtedness.
3
(d) Redemption Payments. For each share of Convertible Preferred which is to be
redeemed hereunder, the Corporation shall be obligated on the redemption date to pay to the holder
thereof (upon surrender by such holder at the Corporation’s principal office of the certificate
representing such share) an amount in cash equal to the Redemption Value. If the funds of the
Corporation legally available for redemption of Convertible Preferred are insufficient to redeem
the total number of shares to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of shares pro rata among the holders of
Convertible Preferred. At any time thereafter when additional funds of the Corporation are legally
available for the redemption of Convertible Preferred, such funds shall immediately be used to
redeem the balance of the shares which the Corporation has become obligated to redeem but which it
has not redeemed.
(e) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Convertible Preferred to each record holder thereof not more than 60 nor less than 30
days prior to the date fixed for redemption thereof. The holders of Convertible Preferred to be
redeemed shall in any event have the right to convert their shares into Common Stock at any time
prior to the close of business on the redemption date. In case fewer than the total number of
shares represented by any certificate are redeemed, a new certificate representing the number of
unredeemed shares shall be issued to the holder thereof without cost to such holder within five
business days after surrender of the certificate representing the redeemed shares.
(f) Determination of the Number of Shares to be Redeemed. The number of shares of
Convertible Preferred to be redeemed from each holder thereof in partial redemptions hereunder
shall be the number of shares determined by multiplying the total number of shares of Series A-1 or
Series A-2 Preferred (as applicable) to be redeemed times a fraction, the numerator of which shall
be the total number of shares of such Series of Convertible Preferred then held by such holder and
the denominator of which shall be the total number of shares of such Series of Convertible
Preferred then outstanding.
(g) Other Redemptions or Acquisitions. The Corporation shall not, nor shall it permit
any Subsidiary to, redeem or otherwise acquire any shares of Convertible Preferred, except as
expressly authorized herein or pursuant to a purchase offer made pro rata to all holders of each
Series of Convertible Preferred on the basis of their respective Liquidation Values and number of
shares owned by each such holder.
5. Conversion Rights.
The holders of the Convertible Preferred shall have the following rights with respect to the
conversion of the Convertible Preferred into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the provisions of this
Section 5, any shares of Convertible Preferred may, at the option of the holder, be converted at
any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common
Stock to which a holder of Series A-1 Preferred shall be entitled upon conversion shall be the
4
product obtained by multiplying the “Series A-1 Conversion Rate” then in effect (determined as
provided in Section 5(b)) by the number of shares of Series A-1 Preferred being
converted. The number of shares of Common Stock to which a holder of Series A-2 Preferred shall be
entitled upon conversion shall be the product obtained by multiplying the “Series A-2 Conversion
Rate” then in effect (determined as provided in Section 5(b)) by the number of shares of Series A-2
Preferred being converted.
(b) Conversion Rates. The conversion rate in effect at any time for conversion of the
Series A-1 Preferred (the “Series A-1 Conversion Rate”) shall be the quotient obtained by
dividing the Original Series A Issue Price, plus any accrued but unpaid dividends thereon, by the
“Series A Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect
at any time for conversion of the Series A-2 Preferred (the “Series A-2 Conversion Rate”)
shall be the quotient obtained by dividing the Original Series A-2 Issue Price, plus any accrued
but unpaid dividends thereon, by the “Series A-2 Conversion Price” calculated as provided in
Section 5(c).
(c) Conversion Prices. The conversion price for the Series A-1 Preferred (the
“Series A-1 Conversion Price”) shall initially be the Original Series A-1 Issue Price, and
the conversion price for the Series A-2 Preferred (the “Series A-2 Conversion Price”) shall
initially be the Original Series A-2 Issue Price. Such initial Series A-1 and A-2 Conversion
Prices (collectively, the “Conversion Prices”) shall be adjusted from time to time in
accordance with this Section 5. If and whenever after March 13, 1998 (the “Original Issue
Date”) the Corporation issues or sells, or in accordance with this Section 5(c) is deemed to
have issued or sold, any shares of its Common Stock (other than pursuant to a Permitted Issuance)
for a consideration per share less than any Conversion Price in effect immediately prior to the
time of such issue or sale, then immediately upon such issue or sale or deemed issue or sale such
Conversion Price shall be reduced to the amount determined by dividing (a) the sum of (1) the
product derived by multiplying such Conversion Price as in effect immediately prior to such issue
or sale by the number of shares of Common Stock Deemed Outstanding immediately prior to such issue
or sale, plus (2) the consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale. All references to the Conversion Prices herein shall mean
the Conversion Prices as so adjusted. For purposes of determining the adjusted Conversion Prices,
the following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner grants or sells
any Options and the price per share for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of
such Options, is less than any Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this paragraph, the
“price per share for which Common Stock is issuable” shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as
consideration for the granting or
5
sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such Options, plus in the
case of such Options which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such Options. In the
event of an adjustment to any Conversion Price as a result of the grant or sale of Options, no
further adjustment to such Conversion Price shall be made when Convertible Securities are actually
issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise
of such Options or the conversion or exchange of the Convertible Securities issued pursuant to such
Options.
(ii) Issuance of Convertible Securities. If the Corporation in any manner issues or
sells any Convertible Securities and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than any Conversion Price in effect immediately prior to the
time of such issue or sale, then for purposes of such Conversion Price the maximum number of shares
of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed
to have been issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share; provided, however, that if such Convertible
Securities contain a default or similar provision that provides for the issuance of additional
securities upon the occurrence of a future event, no adjustment will be made to such Conversion
Price with respect to such additional securities until the occurrence of such event. For the
purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be
determined by dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. In the event of an adjustment to any
Conversion Price as a result of the issuance or sale of Convertible Securities, no further
adjustment of such Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustments of such
Conversion Price had been or are to be made pursuant to other provisions of this Section 5, no
further adjustment of the such Conversion Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Prices in effect at the time of
such change shall be immediately adjusted to the Conversion Prices which would have been in effect
at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration or conversion rate,
as the case may be, at the time initially granted, issued or sold.
6
(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the
expiration of any Option or the termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the Conversion Prices then in effect
hereunder shall be adjusted immediately to the Conversion Prices which would have been in effect at
the time of such expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Option or Convertible
Security is issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security
is issued or sold for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration. If any Common
Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation and the Required Holders. If such parties are
unable to reach agreement within a reasonable period of time, the fair value of such consideration
shall be determined by an independent appraiser experienced in valuing such type of consideration
jointly selected by the Corporation and the Required Holders. The determination of such appraiser
shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Corporation.
(vi) Integrated Transactions. In case any Option is issued in connection with the
issue or sale of other securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such Option by the parties thereto,
the Option shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale
of Common Stock.
(d) Adjustment for Stock Splits and Combinations. If the Corporation shall at any
time or from time to time after the Original Issue Date effect a subdivision of the outstanding
Common Stock, the Conversion Prices in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall it any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock into a smaller
number of shares, the Conversion Prices in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
7
(e) Adjustment for Common Stock Dividends and Distributions. If the Corporation at
any time or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Conversion Prices then in
effect shall be decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying each Conversion Price then
in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date, and (2) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date plus the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the Conversion Prices
shall be recomputed accordingly as of the close of business on such record date and thereafter the
Conversion Prices shall be adjusted pursuant to this Section 5(e) to reflect the actual payment of
such dividend or distribution.
(f) Adjustments for Other Dividends and Distributions. If the Corporation at any time
or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock, in each such event
provision shall be made so that the holders of the Convertible Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Corporation which they would have received had the Convertible
Preferred been converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all other adjustments
called for during such period under this Section 5 with respect to the rights of the holders of the
Convertible Preferred or with respect to such other securities by their terms.
(g) Adjustment for Reclassification, Exchange and Substitution. If at any time or
from time to time after the Original Issue Date, the Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Convertible Preferred shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities or property receivable in connection with
such recapitalization, reclassification or other change with respect to the maximum number of
shares of Common Stock into which such shares of Convertible Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all subject to
further adjustments as provided herein or with respect to such other securities or property by the
terms thereof.
8
(h) Reorganizations, Mergers or Consolidations. If at any time or from time to time
after the Original Issue Date, the Common Stock is converted into other securities or property,
whether pursuant to a reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5), as a part of such transaction provision shall be made so
that the holders of the Convertible Preferred shall thereafter be entitled to receive upon
conversion of such Convertible Preferred the number of shares of stock or other securities or
property to which a holder of the maximum number of shares of Common Stock deliverable upon
conversion would have been entitled in connection with such transaction, subject to adjustment in
respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with respect to the rights of
the holders of Convertible Preferred after the capital reorganization to the end that the
provisions of this Section 5 (including adjustment of the Conversion Prices then in effect and the
number of shares issuable upon conversion of the Convertible Preferred) shall be applicable after
that event and be as nearly equivalent as practicable. The Corporation shall not be a party to any
reorganization, merger or consolidation in which the Corporation is not the surviving entity unless
the entity surviving such transaction assumes, by written instrument satisfactory to the Required
Holders, all the Corporation’s obligations hereunder.
(i) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Conversion Prices or the number of shares of Common Stock or other securities issuable upon
conversion of the Convertible Preferred, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Convertible Preferred at the holder’s address as
shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based, including a
statement of (1) the consideration received or deemed to be received by the Corporation for any
additional shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the
Conversion Prices in effect before and after such adjustment, (3) the number of additional shares
of Common Stock issued or sold or deemed to have been issued or sold, and (4) the type and amount,
if any, of other property which at the time would be received upon conversion of the Convertible
Preferred.
(j) Notices of Record Date. Upon (i) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or (ii) any transaction that would result
in an adjustment pursuant to this Section 5, or (iii) any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each holder of
Convertible Preferred at least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution, (2) the date on which
any such transaction is expected to become effective, and (3) the date, if any, that is to be fixed
for determining the holders of record of Common Stock (or other securities) that shall be entitled
to exchange their shares of Common Stock (or other securities) for securities or other property
deliverable upon such transaction.
9
(k) Automatic Conversion. Each share of Convertible Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Conversion Prices, immediately
upon the closing of an underwritten public offering of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended. In addition, upon the
affirmative vote of the Required Holders at any time, all Convertible Preferred shall be
automatically converted into Common Stock based on the then-effective Conversion Prices.
(l) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Convertible Preferred who desires to convert
the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for
such securities, and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of Convertible Preferred
being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common Stock to which such
holder is entitled. Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Convertible Preferred to
be converted, and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date.
(ii) Automatic Conversion. Upon the occurrence of the event specified in Section 5(k)
above, the outstanding shares of Convertible Preferred shall be converted into Common Stock
automatically without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares
of Convertible Preferred are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon
surrender by any holder of the certificates formerly representing shares of Convertible Preferred
at the office of the Corporation or any transfer agent for such securities, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of shares of Common Stock
into which the shares of Convertible Preferred surrendered were
convertible on the date on which such automatic conversion occurred. Until surrendered as provided
above, each certificate formerly representing shares of Convertible Preferred shall be deemed for
all corporate purposes to represent the number of shares of Common Stock resulting from such
automatic conversion.
(m) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of Convertible Preferred. All shares of Common Stock (including fractions
10
thereof)
issuable upon conversion of more than one share of Convertible Preferred by a holder thereof shall
be aggregated for purposes of determination whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any fractional share,
pay cash equal to the product of such fraction multiplied by the Common Stock’s fair market value
(as determined by the board of directors) on the date of conversion.
6. Certain Definitions.
“Common Stock Deemed Outstanding” means, at any given time, the sum of the number of
shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock
issuable pursuant to Options and Convertible Securities outstanding on the Original Issue Date to
the extent that such Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been issued pursuant to
subparagraphs 5(c)(i) and 5(c)(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.
“Convertible Securities” means any stock or securities directly or indirectly
convertible into or exchangeable for Common Stock.
“Options” means any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“Permitted Issuance” means (i) any issuance of Common Stock upon conversion of any
shares of Convertible Preferred or upon exercise or conversion of any Options or Convertible
Securities that were originally issued in a Permitted Issuance, (ii) any issuance of warrants to
purchase equity securities of the Corporation in connection with a commercial loan or leasing
transaction approved by the Corporation’s board of directors, (iii) any issuance of Common Stock,
Convertible Securities or Options in connection with the acquisition by the Corporation or its
Subsidiaries of another business enterprise or the assets of another business enterprise approved
by the Corporation’s board of directors, or (iv) any issuance of Common Stock or Options to
officers, directors and employees of the Corporation or its Subsidiaries pursuant to one or more
stock option plans approved by the Corporation’s board of directors.
“Subsidiary” means any corporation of which the shares of outstanding capital stock
possessing the voting power (under ordinary circumstances) in electing the board of
directors are, at the time as of which any determination is being made, owned by the Corporation
either directly or indirectly through Subsidiaries.
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7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series A-1
Preferred or Series A-2 Preferred shall be binding or effective without the prior written consent
of the holders of two-thirds of the outstanding Series A-1 or Series A-2 Preferred, as applicable,
and no change in the terms hereof may be accomplished by merger or consolidation of the Corporation
with another corporation or entity unless the Corporation has obtained the prior written consent of
the holders of two-thirds of the outstanding Series A-1 or Series A-2 Preferred, as applicable.
Any amendment, modification or waiver of any of the terms or provisions of the Series A-1 Preferred
or Series A-2 Preferred approved in the manner described in this Section 7, whether prospective or
retroactively effective, shall be binding upon all holders of Series A-1 Preferred or Series A-2
Preferred, as applicable.
8. Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Convertible Preferred. Upon the surrender of any certificate representing Convertible Preferred at
such place, the Corporation shall, at the request of the record holder of such certificate, execute
and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent such number of
shares as is requested by the holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Convertible Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
10. Reservation of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the
shares of Convertible Preferred, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of Convertible Preferred. If
at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then-outstanding shares of Convertible Preferred, the Corporation will
take such
12
corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose.
11. Notices.
Any notice required by the provisions of this Article V shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All notices to stockholders shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
12. Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Convertible Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Convertible Preferred so converted were registered.
13. No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation.
14. No Reissuance of Convertible Preferred.
No share or shares of Convertible Preferred acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
* * * * *
13
3. The foregoing amendment was duly adopted by the Board of Directors of the Corporation on
March 13, 1998.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Articles of Amendment as of the 13th day of March, 1998.
| /s/ Xxx Xxxxxxxx | ||
| Xxx Xxxxxxxx | ||
| President |
14
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL PERSONNEL SERVICES, INC.
Pursuant to Sections 0-000-000 and 0-000-000 of the
Colorado Business Corporation Act
Colorado Business Corporation Act
GLOBAL PERSONNEL SERVICES, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Personnel Services, Inc.
2. The Board of Directors and stockholders of the Corporation on July 10, 1998 duly adopted
the following amendment to the Corporation’s Articles of Incorporation pursuant to Section
0-000-000 of the Colorado Business Corporation Act providing that Article V of the Corporation’s
Articles of Incorporation is amended to read in its entirety as follows:
Article V
A. Authorized Shares: The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is Twenty Million (20,000,000) shares, of which Ten Million
(10,000,000) shares shall constitute Preferred Stock, $.01 par value, and Ten Million (10,000,000)
shares shall constitute Common Stock, $.01 par value.
B. Preferred Stock: The Preferred Stock may be issued from time to time in one or more
classes or series. The board of directors of the Corporation shall have the authority, to the full
extent permitted by the Colorado Business Corporation Act, to designate the Preferred Stock in one
or more classes or series and to fix and determine the relative rights and preferences of such
classes or series so established, including voting, dividend, redemption, liquidation preference
and other rights.
Designation of Series X-0, Xxxxxx X-0, Series A-3
and Series A-4 Convertible Preferred Stock
and Series A-4 Convertible Preferred Stock
One Million Two Hundred Thousand (1,200,000) of the Corporation’s authorized shares of
Preferred Stock, $.01 par value, are hereby designated “Series A-1 Convertible Preferred Stock”
(the “Series A-1 Preferred”), One Hundred Ten Thousand (110,000) of the authorized shares
of Preferred Stock are hereby designated “Series A-2 Convertible Preferred Stock” (the “Series
A-2 Preferred”), Two Million Five Hundred Thousand (2,500,000) of the authorized shares of
Preferred Stock are hereby designated “Series A-3 Convertible Preferred Stock” (the “Series A-3
Preferred”) and One Million Six Hundred Eighty Six Thousand One Hundred Fifty Four (1,686,154)
of the authorized shares of Preferred Stock are hereby designated “Series A-4 Convertible Preferred
Stock” (the “Series A-4 Preferred”). The relative rights, preferences, privileges,
restrictions and other matters relating to the Series A-1 Preferred, Series A-2 Preferred, Series
A-3 Preferred and Series A-4 Preferred (collectively, the “Convertible Preferred”) are as
follows:
1. Dividend Rights.
Holders of Convertible Preferred, in preference to the holders of the Corporation’s Common
Stock, shall be entitled to receive such dividends and other distributions as may be declared by
the Corporation’s board of directors from time to time, when and as declared by the board of
directors, out of funds legally available therefor. Dividends shall accrue on the Series A-1
Preferred on a daily basis at the rate of 5.0% of Series A-1 Liquidation Value per annum, dividends
shall accrue on the Series A-2 Preferred on a daily basis at the rate of 6.0% of Series A-2
Liquidation Value per annum, and dividends shall accrue on the Series A-3 Preferred Stock on a
daily basis at the rate of 5.0% of Series A-3 Liquidation Value per annum. No dividends shall
accrue with respect to the Series A-4 Preferred. To the extent not declared, accrued dividends on
the Convertible Preferred shall accumulate. No dividends or distributions shall be paid on the
Common Stock (other than dividends payable solely in shares of Common Stock) unless the Corporation
shall also declare and pay to the holders of the Series A-1, Series A-2 and Series A-3 Preferred,
at the same time that it declares and pays such dividends to the holders of the Common Stock,
dividends equal to the greater of (x) all accrued and unpaid dividends on the Series A-1, Series
A-2 and Series A-3 Preferred or (y) the dividends which would have been declared and paid with
respect to the Common Stock issuable upon conversion of the Series A-1, Series A-2 and Series A-3
Preferred had all of the outstanding Convertible Preferred been converted immediately prior to the
record date for such dividend, or if no record date is fixed, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined. No dividends shall be
paid on any Series A-1, Series A-2 or Series A-3 Preferred unless equivalent dividends (determined
on an as-converted basis) are concurrently paid on all Series A-1, Series A-2 and Series A-3
Preferred.
2. Voting Rights.
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Except as otherwise required by law, the Convertible Preferred shall vote with the shares of
the Common Stock of the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Convertible Preferred
shall be entitled to such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder’s aggregate number of shares of Convertible Preferred are convertible
(pursuant to Section 5 below) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent. Notwithstanding the foregoing, prior
to the determination of the Conversion Rate applicable to the Series A-4 Preferred, the Series A-4
Preferred shall be entitled to one vote per share.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of any shares of
Common Stock, (i) the holders of Series A-1 Preferred shall be entitled to be paid out of the
assets of the Corporation an amount with respect to each share of Series A-1 Preferred equal to the
sum of $5.28 (the “Original Series A Issue Price”), as appropriately adjusted for any
future stock splits, stock combinations, stock dividends or similar transactions affecting the
Series A Preferred, plus all accrued but unpaid dividends thereon (the “Series A-1 Liquidation
Value”), (ii) the holders of Series A-2 Preferred shall be entitled to be paid out of the
assets of the Corporation an amount with respect to each share of Series A-2 Preferred equal to the
sum of $6.50 (the “Original Series A-2 Issue Price”), as appropriately adjusted for any
future stock splits, stock combinations, stock dividends or similar transactions affecting the
Series A-2 Preferred, plus all accrued but unpaid dividends thereon (the “Series A-2
Liquidation Value”), (iii) the holders of Series A-3 Preferred shall be entitled to be paid out
of the assets of the Corporation an amount with respect to each share of Series A-3 Preferred equal
to the sum of $6.50 (the “Original Series A-3 Issue Price”), as appropriately adjusted for
any future stock splits, stock combinations, stock dividends or similar transactions affecting the
Series A-3 Preferred, plus all accrued but unpaid dividends thereon (the “Series A-3
Liquidation Value”), and (iv) the holders of Series A-4 Preferred shall be entitled to be paid
out of the assets of the Corporation an amount with respect to each share of Series A-4 Preferred
equal to the sum of $6.50 (the “Original Series A-4 Issue Price”), as appropriately
adjusted for any future stock splits, stock combinations, stock dividends or similar transactions
affecting the Series A-4 Preferred (the “Series A-4 Liquidation Value”). If, upon any
liquidation, dissolution or winding up, the assets of the Corporation shall be insufficient to make
payment in full to all holders of Convertible Preferred, then such assets shall be distributed
among the holders of Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred and Series
A-4 Preferred at the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
(b) None of the following events shall be considered a liquidation for purposes of this
Section 3: (i) any consolidation or merger of the Corporation with or into any other corporation or
other entity, (ii) any other corporate reorganization, or (iii) a sale, lease or other disposition
of all or substantially all of the assets of the Corporation.
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4. Redemption Rights.
(a) Optional Redemption. At any time or from time to time on or after June 30, 2003,
the Corporation may redeem all or any portion of the then-outstanding Convertible Preferred at a
redemption price per share equal to the greater of (x) Series A-1 Liquidation Value, Series A-2
Liquidation Value, Series A-3 Liquidation Value or Series A-4 Liquidation Value, as applicable, or
(y) fair market value of the Convertible Preferred as determined by an independent appraiser
mutually acceptable to the Corporation and the holders of a majority of the shares of Convertible
Preferred to be redeemed (the “Redemption Value”).
(b) Mandatory Redemption. At any time on or after June 30, 2003, the holders of
two-thirds of the outstanding shares of Convertible Preferred (the “Required Holders”) may
require the Corporation to redeem all but not less than all of the then-outstanding Convertible
Preferred at a redemption price per share equal to the Redemption Value by delivering written
notice of such election to the Corporation. Upon receipt of such notice of election, the
Corporation shall engage a mutually acceptable appraiser to determine the Redemption Value and
shall call the Convertible Preferred for redemption as of a date not later than 30 days after such
determination. Notwithstanding the foregoing, the holders of two-thirds of the outstanding shares
of Series A-4 Preferred may require the Corporation to redeem all but not less than all of the
then-outstanding Series A-4 Preferred at a redemption price equal to the Redemption Value
applicable to the Series A-4 Preferred at any time on or after June 30, 2003 by delivering written
notice of such election to the Corporation. In the event that the holders of Series A-4 Preferred
exercise such mandatory redemption right, the Corporation shall give prompt notice of such exercise
to all other holders of Convertible Preferred, and such holders shall have the right to require the
Corporation to redeem all or any portion of their shares of Convertible Preferred at the applicable
Redemption Values by delivering written notice of such election to the Corporation within 30 days
following delivery of the Corporation’s notice.
(c) Deferral of Redemption Obligation. Notwithstanding any other provision of this
Section 4, the Corporation shall not be obligated to redeem any shares of Convertible Preferred to
the extent that such redemption is not permitted pursuant to the terms of, or would otherwise
result in a default under, any agreement or instrument evidencing indebtedness of the Corporation
or its Subsidiaries. In the event that the Corporation shall be precluded from redeeming all
shares which it would otherwise be obligated to redeem pursuant to the provisions of this Section
4(c), the Corporation shall redeem the maximum number of shares of Convertible Preferred that it is
permitted to redeem consistent with the terms of such indebtedness and shall thereafter redeem the
balance of such shares at such time or times as such redemption shall be permitted under the terms
of such indebtedness.
(d) Redemption Payments. For each share of Convertible Preferred which is to be
redeemed hereunder, the Corporation shall be obligated on the redemption date to pay to the holder
thereof (upon surrender by such holder at the Corporation’s principal office of the certificate
representing such share) an amount in cash equal to the Redemption Value. If the funds of the
4
Corporation legally available for redemption of Convertible Preferred are insufficient to redeem
the total number of shares to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of shares pro rata among the holders of
Convertible Preferred. At any time thereafter when additional funds of the Corporation are legally
available for the redemption of Convertible Preferred, such funds shall immediately be used to
redeem the balance of the shares which the Corporation has become obligated to redeem but which it
has not redeemed.
(e) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Convertible Preferred to each record holder thereof not more than 60 nor less than 30
days prior to the date fixed for redemption thereof. The holders of Convertible Preferred to be
redeemed shall in any event have the right to convert their shares into Common Stock at any time
prior to the close of business on the redemption date. In case fewer than the total number of
shares represented by any certificate are redeemed, a new certificate representing the number of
unredeemed shares shall be issued to the holder thereof without cost to such holder within five
business days after surrender of the certificate representing the redeemed shares.
(f) Determination of the Number of Shares to be Redeemed. The number of shares of
Convertible Preferred to be redeemed from each holder thereof in partial redemptions hereunder
shall be the number of shares determined by multiplying the total number of shares of Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred or Series A-4 Preferred (as applicable) to be
redeemed times a fraction, the numerator of which shall be the total number of shares of such
Series of Convertible Preferred then held by such holder and the denominator of which shall be the
total number of shares of such Series of Convertible Preferred then outstanding.
5. Conversion Rights.
The holders of the Convertible Preferred shall have the following rights with respect to the
conversion of the Convertible Preferred into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the provisions of this
Section 5, any shares of Convertible Preferred may, at the option of the holder, be converted at
any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common
Stock to which a holder of Series A-1 Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the “Series A-1 Conversion Rate” then in effect (determined as
provided in Section 5(b)) by the number of shares of Series A-1 Preferred being converted. The
number of shares of Common Stock to which a holder of Series A-2 Preferred shall be entitled upon
conversion shall be the product obtained by multiplying the “Series A-2 Conversion Rate” then in
effect (determined as provided in Section 5(b)) by the number of shares of Series A-2 Preferred
being converted. The number of shares of Common Stock to
which a holder of Series A-3 Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the “Series A-3 Conversion Rate” then in effect (determined as provided in
Section 5(b)) by the number of shares of Series A-3 Preferred being converted. The number of
shares of Common Stock to which a holder of Series A-4 Preferred shall be entitled upon conversion
shall be the product obtained by multiplying
5
the “Series A-4 Conversion Rate” then in effect
(determined as provided in Section 5(b)) by the number of shares of Series A-4 Preferred being
converted.
(b) Conversion Rates. The conversion rate in effect at any time for conversion of the
Series A-1 Preferred (the “Series A-1 Conversion Rate”) shall be the quotient obtained by
dividing the Original Series A Issue Price, plus any accrued but unpaid dividends thereon, by the
“Series A Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect
at any time for conversion of the Series A-2 Preferred (the “Series A-2 Conversion Rate”)
shall be the quotient obtained by dividing the Original Series A-2 Issue Price, plus any accrued
but unpaid dividends thereon, by the “Series A-2 Conversion Price” calculated as provided in
Section 5(c). The conversion rate in effect at any time for conversion of the Series A-3
Preferred (the “Series A-3 Conversion Rate”) shall be the quotient determined by dividing
the Original Series A-3 Issue Price, plus any accrued but unpaid dividends thereon, by the “Series
A-3 Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect at any
time for conversion of the Series A-4 Preferred (the “Series A-4 Conversion Rate”) shall be
the quotient determined by dividing the Original Series A-4 Issue Price by the “Series A-4
Conversion Price” determined pursuant to Section 5(d).
(c) Series A-1, Series A-2 and Series A-3 Conversion Prices. The conversion price for
the Series A-1 Preferred (the “Series A-1 Conversion Price”) shall initially be the
Original Series A-1 Issue Price, the conversion price for the Series A-2 Preferred (the “Series
A-2 Conversion Price”) shall initially be the Original Series A-2 Issue Price, and the
conversion price for the Series A-3 Preferred (the “Series A-3 Conversion Price”) shall
initially by the Original Series A-3 Issue Price. Such initial Series A-1, Series A-2 and Series
A-3 Conversion Prices shall be adjusted from time to time in accordance with this Section 5. If
and whenever after March 13, 1998 (the “Original Issue Date”) the Corporation issues or
sells, or in accordance with this Section 5(c) is deemed to have issued or sold, any shares of its
Common Stock (other than pursuant to a Permitted Issuance) for a consideration per share less than
any Conversion Price in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale or deemed issue or sale such Conversion Price shall be reduced
to the amount determined by dividing (a) the sum of (1) the product derived by multiplying such
Conversion Price as in effect immediately prior to such issue or sale by the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received or deemed to have been received by the Corporation upon such issue
or sale, by (b) the number of shares of Common Stock Deemed Outstanding immediately after such
issue or sale. All references to the Conversion Prices herein shall mean the Conversion Prices as
so adjusted. For purposes of determining the adjusted Conversion Prices, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner grants or sells
any Options and the price per share for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of
such Options, is less than any Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or upon
6
conversion or
exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this paragraph, the
“price per share for which Common Stock is issuable” shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for the granting or sale
of such Options, plus the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. In the event of an adjustment to any Conversion Price
as a result of the grant or sale of Options, no further adjustment to such Conversion Price shall
be made when Convertible Securities are actually issued upon the exercise of such Options or when
Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of
the Convertible Securities issued pursuant to such Options.
(ii) Issuance of Convertible Securities. If the Corporation in any manner issues or
sells any Convertible Securities and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than any Conversion Price in effect immediately prior to the
time of such issue or sale, then for purposes of such Conversion Price the maximum number of shares
of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed
to have been issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share; provided, however, that if such Convertible
Securities contain a default or similar provision that provides for the issuance of additional
securities upon the occurrence of a future event, no adjustment will be made to such Conversion
Price with respect to such additional securities until the occurrence of such event. For the
purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be
determined by dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. In the event of an adjustment to any
Conversion Price as a result of the issuance or sale of Convertible Securities, no further
adjustment of such Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of such Conversion Price had been or are to be made pursuant to other provisions of
this Section 5, no further adjustment of such Conversion Price shall be made by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Prices in
7
effect at the time of
such change shall be immediately adjusted to the Conversion Prices which would have been in effect
at such time had such Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the
expiration of any Option or the termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the Conversion Prices then in effect
hereunder shall be adjusted immediately to the Conversion Prices which would have been in effect at
the time of such expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Option or Convertible
Security is issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security
is issued or sold for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration. If any Common
Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation and the Required Holders. If such parties are
unable to reach agreement within a reasonable period of time, the fair value of such consideration
shall be determined by an independent appraiser experienced in valuing such type of consideration
jointly selected by the Corporation and the Required Holders. The determination of such appraiser
shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Corporation.
(vi) Integrated Transactions. In case any Option is issued in connection with the
issue or sale of other securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such Option by the parties thereto,
the Option shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale
of Common Stock.
(d) Series A-4 Conversion Price. Prior to the Determination Date, the Series A-4
Preferred shall not be convertible. Following the Determination Date, the conversion price for the
Series A-4 Preferred (the “Series A-4 Conversion Price”) shall be equal to $10,960,000
divided by the number of “Conversion Shares” determined in accordance with the formula set forth
below.
8
Once the Series A-4 Conversion Price has been determined pursuant to this Section 5(d),
such Conversion Price shall thereafter be subject to adjustment pursuant to Section 5(c) and
Sections 5(e) through (i).
The number of Conversion Shares shall equal Y minus C, where:
C = the number of shares of the Corporation’s fully-diluted Common Stock outstanding as of
the Determination Date, giving effect to the exercise of all outstanding Options (other than
options to purchase up to 5.0% of the fully-diluted Common Stock issued to employees of the
Corporation and its subsidiaries) and the conversion of all Convertible Securities (other
than the Series A-4 Preferred) but without giving effect to the issuance of any Disqualified
Shares;
Y = C / (1 — X); and
X = 50.1% of the Appraised Value of Southeastern Professional Employers, Inc., a
wholly-owned subsidiary of the Corporation (“Southeastern”), divided by the
Appraised Value of the Corporation (including Southeastern), in each case determined as of
the Determination Date.
For purposes of this Section 5(d), (i) “Determination Date” shall mean either December 31,
1998 or December 31, 1999, at the election of the holders of a majority of the outstanding Series
A-4 Preferred made within 30 days following delivery of the Corporation’s audited financial
statements for the fiscal year ending on such date; (ii) “Appraised Value” shall mean the
fair market value of Southeastern or the Corporation, as applicable, based on prevailing industry
multiples (for the temporary staffing industry in the case of the Corporation and the PEO industry
in the case of Southeastern) of trailing 12-months and projected 12-months Adjusted EBITDA for the
Corporation and Southeastern, respectively, determined by mutual agreement of the Corporation and
the holders of a majority of the outstanding Series A-4 Preferred or, if such persons are unable to
agree upon such value within 30 days following delivery of the Corporation’s audited financial
statements for the fiscal year ending on the Determination Date, by a mutually acceptable
independent appraisal firm selected by such persons (or, if the parties are unable to agree upon an
appraiser, such appraiser shall be selected by the Denver, Colorado office of the American
Arbitration Association); (iii) “Disqualified Shares” shall mean any shares of Common Stock
(or securities convertible into or exercisable for Common Stock) issued
by the Corporation after the date hereof either (x) as consideration for the acquisition by
Southeastern or any of its subsidiaries of any “leased employee” operations, or (y) the proceeds of
which are utilized as consideration for any such acquisition; provided, however, that (A) shares
described in the preceding clause (y) shall constitute Disqualified Stock only after the issuance
by the Corporation of at least $11,450,000 of Series A-3 Preferred and the expenditure by the
Corporation of the proceeds of such issuance, and (B) in the case of an acquisition of a business
involving operations in addition to leased employee operations, the shares described in the
preceding clauses (x) and (y) shall constitute Disqualified Stock only to the extent of (and in
proportion to) the total purchase consideration for such business that is attributable to employee
leasing operations, as determined in good faith by the Corporation’s Board of Directors;
9
and (iv)
“Adjusted EBITDA” shall mean earnings before interest, tax, depreciation and amortization
expense, determined in accordance with generally accepted accounting principles consistently
applied, adjusted to eliminate management fees paid to KRG Capital Partners, LLC, excess
compensation expense paid to former owners of acquired businesses and extraordinary gains and
losses. For purposes of determining Appraised Value, (i) all interest-bearing indebtedness of the
Corporation and Southeastern shall be disregarded, (ii) all corporate overhead expenses of the
Corporation shall be allocated to the Corporation’s subsidiaries on the basis of their respective
contributions to Adjusted EBITDA, and (iii) in the case of Southeastern, Adjusted EBITDA shall
include that portion of Adjusted EBITDA attributable to “leased employee” operations acquired after
the date hereof and shall exclude that portion of Adjusted EBITDA attributable to operations other
than leased employee operations, with the computation of Adjusted EBITDA for leasing operations
reflecting trending workers compensation insurance premium rates and with overhead expenses
allocated among leasing and non-leasing operations in proportion to their respective contributions
to Southeastern’s gross profit or as otherwise agreed by the Corporation and the holders of a
majority of the outstanding Series A-4 Preferred.
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall at any
time or from time to time after the Original Issue Date effect a subdivision of the outstanding
Common Stock, the Conversion Prices in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall it any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number
of shares, the Conversion Prices in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(e) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If the Corporation at
any time or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Conversion Prices then in
effect shall be decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying each Conversion Price then
in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date, and (2) the denominator of which is the
total number of shares of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if such record date
is fixed and such dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Prices shall be recomputed accordingly as of the close of business
on such record date and thereafter the Conversion Prices shall be adjusted pursuant to this Section
5(f) to reflect the actual payment of such dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. If the Corporation at any time
or from time to time after the Original Issue Date makes, or fixes a record date for the
10
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock, in each such event
provision shall be made so that the holders of the Convertible Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Corporation which they would have received had the Convertible
Preferred been converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all other adjustments
called for during such period under this Section 5 with respect to the rights of the holders of the
Convertible Preferred or with respect to such other securities by their terms.
(h) Adjustment for Reclassification, Exchange and Substitution. If at any time or
from time to time after the Original Issue Date, the Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Convertible Preferred shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities or property receivable in connection with
such recapitalization, reclassification or other change with respect to the maximum number of
shares of Common Stock into which such shares of Convertible Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all subject to further
adjustments as provided herein or with respect to such other securities or property by the terms
thereof.
(i) Reorganizations, Mergers or Consolidations. If at any time or from time to time
after the Original Issue Date, the Common Stock is converted into other securities or property,
whether pursuant to a reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5), as a part of such transaction provision shall be made so
that the holders of the Convertible Preferred shall thereafter be entitled to receive upon
conversion of such Convertible Preferred the number of shares of stock or other securities or
property to which a holder of the maximum number of shares of Common Stock deliverable upon
conversion would have been entitled in connection with such transaction, subject to adjustment in
respect of such stock or securities by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of Convertible Preferred after the capital reorganization to
the end that the provisions of this Section 5 (including adjustment of the Conversion Prices then
in effect and the number of shares issuable upon conversion of the Convertible Preferred) shall be
applicable after that event and be as nearly equivalent as practicable. The Corporation shall not
be a party to any reorganization, merger or consolidation in which the Corporation is not the
surviving entity unless the entity surviving such transaction assumes, by written instrument
satisfactory to the Required Holders, all the Corporation’s obligations hereunder.
11
(j) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Conversion Prices or the number of shares of Common Stock or other securities issuable upon
conversion of the Convertible Preferred, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Convertible Preferred at the holder’s address as
shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based, including a
statement of (1) the consideration received or deemed to be received by the Corporation for any
additional shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the
Conversion Prices in effect before and after such adjustment, (3) the number of additional shares
of Common Stock issued or sold or deemed to have been issued or sold, and (4) the type and amount,
if any, of other property which at the time would be received upon conversion of the Convertible
Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or (ii) any transaction that would result
in an adjustment pursuant to this Section 5, or (iii) any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each holder of
Convertible Preferred at least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on which any such
transaction is expected to become effective, and (3) the date, if any, that is to be fixed for
determining the holders of record of Common Stock (or other securities) that shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or other property
deliverable upon such transaction.
(l) Automatic Conversion. Each share of Convertible Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Conversion Rates, immediately
upon the closing of an underwritten public offering of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended. In addition, upon the
affirmative vote of the Required Holders at any time, all Convertible Preferred shall be
automatically converted into Common Stock based on the then-effective Conversion Rates.
(m) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Convertible Preferred who desires to convert
the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for
such securities, and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of Convertible Preferred
being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common Stock to which such
holder is entitled. Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Convertible Preferred to
be
12
converted, and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date.
(ii) Automatic Conversion. Upon the occurrence of the event specified in Section 5(l)
above, the outstanding shares of Convertible Preferred shall be converted into Common Stock
automatically without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares
of Convertible Preferred are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon
surrender by any holder of the certificates formerly representing shares of Convertible Preferred
at the office of the Corporation or any transfer agent for such securities, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of shares of Common Stock
into which the shares of Convertible Preferred surrendered were convertible on the date on which
such automatic conversion occurred. Until surrendered as provided above, each certificate formerly
representing shares of Convertible Preferred shall be deemed for all corporate purposes to
represent the number of shares of Common Stock resulting from such automatic conversion.
(n) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of any shares of Convertible Preferred. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Convertible Preferred by a holder
thereof shall be aggregated for purposes of determination whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by the
Common Stock’s fair market value (as determined by the board of directors) on the date of
conversion.
6. Certain Definitions.
“Common Stock Deemed Outstanding” means, at any given time, the sum of the number of
shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock
issuable pursuant to Options and Convertible Securities outstanding on the Original Issue Date to
the extent that such Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been issued pursuant to
subparagraphs 5(c)(i) and 5(c)(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.
13
“Convertible Securities” means any stock or securities directly or indirectly
convertible into or exchangeable for Common Stock.
“Options” means any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“Permitted Issuance” means (i) any issuance of Common Stock upon conversion of any
shares of Convertible Preferred or upon exercise or conversion of any Options or Convertible
Securities that were originally issued in a Permitted Issuance, (ii) any issuance of warrants to
purchase equity securities of the Corporation in connection with a commercial loan or leasing
transaction approved by the Corporation’s board of directors, (iii) any issuance of Common Stock,
Convertible Securities or Options in connection with the acquisition by the Corporation or its
Subsidiaries of another business enterprise or the assets of another business enterprise approved
by the Corporation’s board of directors, or (iv) any issuance of Common Stock or Options to
officers, directors and employees of the Corporation or its Subsidiaries pursuant to one or more
stock option plans approved by the Corporation’s board of directors.
“Subsidiary” means any corporation of which the shares of outstanding capital stock
possessing the voting power (under ordinary circumstances) in electing the board of directors are,
at the time as of which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.
7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred or Series A-4 Preferred shall be binding or
effective without the prior written consent of the holders of two-thirds of the outstanding Series
A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred or Series A-4 Preferred, as applicable,
and no change in such terms may be accomplished by merger or consolidation of the Corporation with
another corporation or entity unless the Corporation has obtained the prior written consent of the
holders of two-thirds of the outstanding Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred or Series A-4 Preferred, as applicable. Any
amendment, modification or waiver of any of the terms or provisions of any Series of Convertible
Preferred approved in the manner described in this Section 7, whether prospective or retroactively
effective, shall be binding upon all holders of such Series of Convertible Preferred.
8. Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Convertible Preferred. Upon the surrender of any certificate representing Convertible Preferred at
such place, the Corporation shall, at the request of the record holder of such certificate, execute
and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent such number of
shares as is
14
requested by the holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Convertible Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
10. Reservation of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares
of Convertible Preferred, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Convertible Preferred. If at any
time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then-outstanding shares of Convertible Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose.
11. Notices.
Any notice required by the provisions of this Article V shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All notices to stockholders shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
12. Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Convertible Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
15
Common Stock in a name
other than that in which the shares of Convertible Preferred so converted were registered.
13. No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation.
14. No Reissuance of Convertible Preferred.
No share or shares of Convertible Preferred acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
C. Transfer Restrictions: The Corporation shall have the right, by appropriate action, to
impose restrictions upon the transfer of any shares of its capital stock, or any interest therein,
from time to time issued, provided that notice of such restrictions shall be set forth upon the
face or back of the certificates representing such shares of capital stock.
D. Preemptive Rights: Except as otherwise agreed to by the Corporation, no shareholder of the
Corporation shall have any preemptive or other right to subscribe for any additional unissued or
treasury shares of capital stock or for other securities of any class, or for rights, warrants or
options to purchase capital stock, or for securities of any kind convertible into or exchangeable
for capital stock.
* * * * *
3. The number of shares of the Corporation’s stock voted in favor of the foregoing amendment
by each voting group entitled to vote separately on the amendment was sufficient for approval by
such voting group.
16
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Articles of Amendment pursuant to Section 0-000-000 of the Colorado Business Corporation Act
as of the 10th day of July, 1998.
/s/ Xxx Xxxxxxxx
Xxx Xxxxxxxx
|
||||
| President |
17
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL PERSONNEL SERVICES, INC.
Establishing the Preferences, Limitations and Relative Rights of
Series B-2 Convertible Preferred Stock
Pursuant to Section 0-000-000 of the Colorado Business Corporation Act
Series B-2 Convertible Preferred Stock
Pursuant to Section 0-000-000 of the Colorado Business Corporation Act
GLOBAL PERSONNEL SERVICES, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Personnel Services, Inc.
2. The Board of Directors of the Corporation, pursuant to authority granted by the Articles of
Incorporation, duly adopted the following amendment to the Articles of Incorporation establishing
the preferences, limitations and relative rights of the Corporation’s Series B-2 Convertible
Preferred Stock pursuant to Section 0-000-000 of the Colorado Business Corporation Act:
Designation of Series B-2 Preferred Stock
One Hundred Fifty Thousand (150,000) of the Corporation’s authorized shares of Preferred
Stock, $.01 par value, are hereby designated “Series B-2 Convertible Preferred Stock” (the
“Series B-2 Preferred”). The relative rights, preferences, privileges, restrictions and
other matters relating to the Series B-2 Preferred are as follows:
(a) Dividend Rights.
Holders of Series B-2 Preferred, subject to the prior rights of the Corporation’s Series X-0,
X-0, X-0, X-0 and A-5 Convertible Preferred Stock and any other class of Preferred Stock that is
senior to the Series B-2 Preferred (collectively, the “Senior Stock”) and in preference to
the holders of the Corporation’s Common Stock, shall be entitled to receive such dividends and
other distributions as may be declared by the Corporation’s board of directors from time to time,
when and as declared by the board of directors, out of funds legally available therefor. Dividends
shall accrue on the Series B-2 Preferred at the rate of 3.0% of Series B-2 Liquidation Value per
annum. To the extent not declared, accrued dividends on the Series B-2 Preferred shall accumulate.
No dividends or distributions shall be paid on the Common Stock (other than dividends payable
solely in shares of Common Stock) unless the Corporation shall also declare and pay to the holders
of the Series B-2 Preferred, at the same time that it declares and pays such dividends to the
holders of the Common Stock, all accrued and unpaid dividends on the Series B-2 Preferred.
(b) Voting Rights.
Except as otherwise required by law, the Series B-2 Preferred shall vote with the shares of
the Common Stock of the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock, with each share of Series B-2 Preferred entitled to one-half of one vote.
(c) Liquidation Rights.
(1) Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, subject to the prior rights of the Senior Stock but before
any distribution or payment shall be made to the holders of any shares of Common
Stock, (i) the holders of Series B-2 Preferred shall be entitled to be paid out of
the assets of the Corporation an amount with respect to each share of Series B-2
Preferred equal to the sum of $.50 (the “Original Series B-2 Issue Price”),
as appropriately adjusted for any future stock splits, stock combinations, stock
dividends or similar transactions affecting the Series B-2 Preferred, plus all
accrued but unpaid dividends thereon (the “Series B-2 Liquidation Value”).
If, upon any liquidation, dissolution or winding up, after payment of the full
liquidation preference of the Senior Stock, the assets of the Corporation shall be
insufficient to make payment in full to all holders of Series B-2 Preferred, then
such assets shall be distributed among the holders of Series B-2 Preferred at the
time outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
(2) None of the following events shall be considered a liquidation for purposes
of this Section 3: (i) any consolidation or merger of the Corporation with or into
any other corporation or other entity, (ii) any other corporate reorganization; or
(iii) any sale, lease or other disposition of all or substantially all of the assets
of the Corporation.
(d) Redemption Rights.
(a) Optional Redemption. At any time or from time to time, the Corporation may redeem
all or any portion of the then-outstanding Series B-2 Preferred at a redemption price per share
equal to the then-current Series B-2 Liquidation Value (the “Redemption Value”).
(b) Redemption Payments. For each share of Series B-2 Preferred which is to be
redeemed hereunder, the Corporation shall be obligated on the redemption date to pay to the holder
thereof (upon surrender by such holder at the Corporation’s principal office of the certificate
representing such share) an amount in cash equal to the Redemption Value. If the funds of the
Corporation legally available for redemption of Series B-2 Preferred are insufficient to redeem the
total number of shares to be redeemed on such date, those funds which are legally available shall
be used to redeem the maximum possible number of shares pro rata among the holders of Series B-2
Preferred. At any time thereafter when additional funds of the Corporation are legally available
for the redemption of Series B-2 Preferred, such funds shall immediately be used to redeem the
balance of the shares which the Corporation has become obligated to redeem but which it has not
redeemed.
(c) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Series B-2 Preferred to each record holder thereof not more than 60 nor less than 30
days prior to the date fixed for redemption thereof. The holders of Series B-2 Preferred to be
redeemed shall in any event have the right to convert their shares into Common Stock at any time
prior to the close of business on the redemption date. In case fewer than the total number of
shares represented by any certificate are redeemed, a new certificate representing the number of
unredeemed shares shall be issued to the holder thereof without cost to such holder within five
business days after surrender of the certificate representing the redeemed shares.
(d) Determination of the Number of Shares to be Redeemed. The number of shares of
Series B-2 Preferred to be redeemed from each holder thereof in partial redemptions hereunder shall
be the number of shares determined by multiplying the total number of shares of Series B-2 to be
redeemed times a fraction, the numerator of which shall be the total number of shares of such
Series of Series B-2 Preferred then held by such holder and the denominator of which shall be the
total number of shares of such Series of Series B-2 Preferred then outstanding.
(e) Conversion
Rights.
The holders of the Series B-2 Preferred shall have the following rights with respect to the
conversion of the Series B-2 Preferred into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the provisions of this
Section 5, any shares of Series B-2 Preferred may, at the option of the holder, be converted at any
time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common
Stock to which a holder of Series B-2 Preferred shall be entitled upon conversion shall be the
product obtained by
multiplying the “Series B-2 Conversion Rate” then in effect (determined as provided in Section
5(b)) by the number of shares of Series B-2 Preferred being converted.
(b) Conversion Rate. The conversion rate in effect at any time for conversion of the
Series B-2 Preferred (the “Series B-2 Conversion Rate”) shall be the quotient obtained by
dividing the Original Series B-2 Issue Price by the “Series B-2 Conversion Price,” which
shall initially be the Original Series B-2 Issue Price. The Series B-2 Conversion Price shall be
adjusted from time to time only in accordance with this Section 5(b).
(i) Adjustment for Stock Splits and Combinations. If the Corporation shall at
any time or from time to time after September 11, 1998 (the “Original Issue Date”) effect a
subdivision of the outstanding Common Stock, the Series B-2 Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the Corporation shall
it any time or from time to time after the Original Issue Date combine the outstanding shares of
Common Stock into a smaller number of shares, the Series B-2 Conversion Price in effect immediately
before the combination shall be proportionately increased. Any adjustment under this clause (i)
shall become effective at the close of business on the date the subdivision or combination becomes
effective.
(ii) Adjustment for Common Stock Dividends and Distributions. If the Corporation at
any time or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Series B-2 Conversion Price
then in effect shall be decreased as of the time of such issuance by multiplying the Series B-2
Conversion Price then in effect by a fraction (1) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to such issuance, and (2) the
denominator of which is the total number of shares of Common Stock issued and outstanding
immediately prior to such issuance plus the number of shares of Common Stock issued in payment of
such dividend or distribution.
(iii) Adjustments for Other Dividends and Distributions. If the Corporation at any
time or from time to time after the Original Issue Date makes a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock, in each such event
provision shall be made so that the holders of the Series B-2 Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Corporation which they would have received had the Series B-2
Preferred been converted into Common Stock on the date of such dividend or other distributions.
(iv) Adjustment for Reclassification, Exchange and Substitution. If at any time or
from time to time after the Original Issue Date, the Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger or consolidation provided for elsewhere in this Section 5(b)), in any
such event each holder of Series B-2 Preferred shall have the right thereafter to convert such
stock into the kind and amount of stock and other
securities or property receivable in connection with such recapitalization, reclassification
or other change with respect to the number of shares of Common Stock into which such shares of
Series B-2 Preferred could have been converted immediately prior to such recapitalization,
reclassification or change.
(v) Reorganizations, Mergers or Consolidations. If at any time or from time to
time after the Original Issue Date, the Common Stock is converted into other securities or
property, whether pursuant to a reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5(b)), as a part of such transaction provision shall be made
so that the holders of the Series B-2 Preferred shall thereafter be entitled to receive upon
conversion of such Series B-2 Preferred the number of shares of stock or other securities or
property to which a holder of the shares of Common Stock deliverable upon conversion would have
been entitled in connection with such transaction.
(vi) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Series B-2 Conversion Price or the number of shares of Common Stock or other securities issuable
upon conversion of the Series B-2 Preferred, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Series B-2 Preferred at the holder’s address as shown
in the Corporation’s books.
(c) Automatic Conversion. Each share of Series B-2 Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series B-2 Conversion Price,
immediately upon the closing of an underwritten public offering of Common Stock pursuant to an
effective registration statement under the Securities Act of 1933, as amended.
(d) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Series B-2 Preferred who desires to convert
the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for
such securities, and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of Series B-2 Preferred
being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common Stock to which such
holder is entitled. Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Series B-2 Preferred to be
converted, and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date. Upon any such conversion, the Corporation shall pay all accrued dividends on the shares
of Series B-2 so converted.
(ii) Automatic Conversion. Upon the occurrence of the event specified in Section 5(c)
above, the outstanding shares of Series B-2 Preferred shall be converted into Common Stock
automatically without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares
of Series B-2 Preferred are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon
surrender by any holder of the certificates formerly representing shares of Series B-2 Preferred at
the office of the Corporation or any transfer agent for such securities, there shall be issued and
delivered to such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of shares of Common Stock
into which the shares of Series B-2 Preferred surrendered were convertible on the date on which
such automatic conversion occurred and the Corporation shall pay all accured dividends on the
shares of Series B-2 Preferred so converted. Until surrendered as provided above, each certificate
formerly representing shares of Series B-2 Preferred shall be deemed for all corporate purposes to
represent the number of shares of Common Stock resulting from such automatic conversion.
(e) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of Series B-2 Preferred. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series B-2 Preferred by a holder thereof shall
be aggregated for purposes of determination whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any fractional share,
pay cash equal to the product of such fraction multiplied by the Common Stock’s fair market value
(as determined by the board of directors) on the date of conversion.
(f) Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series B-2
Preferred shall be binding or effective without the prior written consent of the holders of a
majority of the then-outstanding Series B-2 Preferred (the “Required Holders”), and no
change in the terms hereof may be accomplished by merger or consolidation of the Corporation with
another corporation or entity unless the Corporation has obtained the prior written consent of the
Required Holders. Any amendment, modification or waiver of any of the terms or provisions of the
Series B-2 Preferred approved in the manner described in this Section 6, whether prospective or
retroactively effective, shall be binding upon all holders of Series B-2 Preferred.
(g) Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Series B-2 Preferred. Upon the surrender of any certificate representing Series B-2 Preferred at
such place, the Corporation shall, at the request of the record holder of such certificate, execute
and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent such number of
shares as is requested by the
holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
(h) Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Series B-2 Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
(i) Reservation
of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares
of Series B-2 Preferred, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series B-2 Preferred. If at any
time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then-outstanding shares of Series B-2 Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose.
(j) Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series B-2 Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Series B-2 Preferred so converted were registered.
(k) No Reissuance of Series B-2 Preferred.
No share or shares of Series B-2 Preferred acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
* * * * *
3. The foregoing amendment was duly adopted by the Board of Directors of the Corporation on
September 10, 1998.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Articles of Amendment as of the 10th day of September, 1998.
| /s/ Xxx Xxxxxxxx | ||
| Xxx Xxxxxxxx | ||
| President |
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL PERSONNEL SERVICES, INC.
Pursuant to Sections 0-000-000 and 0-000-000 of the
Colorado Business Corporation Act
Colorado Business Corporation Act
GLOBAL PERSONNEL SERVICES, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Personnel Services, Inc.
2. The Board of Directors and stockholders of the Corporation on August 27, 1998 and September
9, 1998, respectively, duly adopted the following amendment to the Corporation’s Articles of
Incorporation pursuant to Section 0-000-000 of the Colorado Business Corporation Act providing that
Articles I and V of the Corporation’s Articles of Incorporation are amended to read in their
entirety as follows:
Article I
The name of the corporation is Global Employment Solutions, Inc. (the “Corporation”).
* * * * *
Article V
A. Authorized Shares: The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is Twenty Million (20,000,000) shares, of which Ten Million
(10,000,000) shares shall constitute Preferred Stock, $.01 par value, and Ten Million (10,000,000)
shares shall constitute Common Stock, $.01 par value.
B. Preferred Stock: The Preferred Stock may be issued from time to time in one or more
classes or series. The board of directors of the Corporation shall have the authority, to the full
extent permitted by the Colorado Business Corporation Act, to designate the Preferred Stock in one
or more classes or series and to fix and determine the relative rights and preferences of such
classes or series so established, including voting, dividend, redemption, liquidation preference
and other rights.
Designation of Series X-0, Xxxxxx X-0, Series A-3, Series A-4 and Series A-5
Convertible Preferred Stock
Convertible Preferred Stock
One Million Two Hundred Thousand (1,200,000) of the Corporation’s authorized shares of
Preferred Stock, $.01 par value, are hereby designated “Series A-1 Convertible Preferred Stock”
(the “Series A-1 Preferred”), One Hundred Ten Thousand (110,000) of the authorized shares
of Preferred Stock are hereby designated “Series A-2 Convertible Preferred Stock” (the “Series
A-2 Preferred”), Two Million Five Hundred Thousand (2,500,000) of the authorized shares of
Preferred Stock are hereby designated “Series A-3 Convertible Preferred Stock” (the “Series A-3
Preferred”), One Million Six Hundred Eighty Six Thousand One Hundred Fifty Four (1,686,154) of
the authorized shares of Preferred Stock are hereby designated “Series A-4 Convertible Preferred
Stock” (the “Series A-4 Preferred”), and One Hundred Forty Two Thousand Eight Hundred Fifty
Seven (142,857) of the authorized shares of Preferred Stock are hereby designated “Series A-5
Convertible Preferred Stock” (the “Series A-5 Preferred”). The relative rights,
preferences, privileges, restrictions and other matters relating to the Series A-1 Preferred,
Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred and Series A-5 Preferred
(collectively, the “Convertible Preferred”) are as follows:
(a) Dividend
Rights.
Holders of Convertible Preferred, in preference to the holders of the Corporation’s Common
Stock, shall be entitled to receive such dividends and other distributions as may be declared by
the Corporation’s board of directors from time to time, when and as declared by the board of
directors, out of funds legally available therefor. Dividends shall accrue on the Series A-1
Preferred on a daily basis at the rate of 5.0% of Series A-1 Liquidation Value per annum, dividends
shall accrue on the Series A-2 Preferred on a daily basis at the rate of 6.0% of Series A-2
Liquidation Value per annum, dividends shall accrue on the Series A-3 Preferred Stock on a daily
basis at the rate of 5.0% of Series A-3 Liquidation Value per annum, and dividends shall accrue on
the Series A-5 Preferred Stock on a daily basis at the rate of 5.0% of Series A-5 Liquidation Value
per annum. No dividends shall accrue with respect to the Series A-4 Preferred. To the extent not
declared, accrued dividends on the Convertible Preferred shall accumulate. No dividends or
distributions shall be paid on the Common Stock (other than dividends payable solely in shares of
Common Stock) unless the Corporation shall also declare and pay to the holders of the Series A-1,
Series A-2, Series A-3 and Series A-5 Preferred, at the same time that it declares and pays such
dividends to the holders of the Common Stock, dividends equal to the greater of (x) all accrued and
unpaid dividends on the Series X-0, Xxxxxx X-0, Series A-3 and Series A-5 Preferred or (y) the
dividends which would have been declared and paid with respect to the Common Stock issuable upon
conversion of the Series X-0, Xxxxxx X-0, Series A-3 and Series A-5 Preferred had all of the
outstanding Convertible Preferred been converted immediately prior to the record date for such
dividend, or if no record date is fixed, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined. No dividends shall be paid on any Series X-0,
Xxxxxx X-0, Series A-3 or Series A-5 Preferred unless equivalent dividends (determined on an
as-converted basis) are concurrently paid on all Series X-0, Xxxxxx X-0, Series A-3 and Series A-5
Preferred.
(b) Voting
Rights.
Except as otherwise required by law, the Convertible Preferred shall vote with the shares of
the Common Stock of the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Convertible Preferred
shall be entitled to such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder’s aggregate number of shares of Convertible Preferred are convertible
(pursuant to Section 5 below) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent. Notwithstanding the foregoing, prior
to the determination of the Conversion Rate applicable to the Series A-4 Preferred, the Series A-4
Preferred shall be entitled to one vote per share.
(c) Liquidation
Rights.
(1) Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any distribution or payment shall be made to the
holders of any shares of Common Stock, (i) the holders of Series A-1 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-1 Preferred equal to the sum of $5.28 (the
“Original Series A Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-1 Preferred, plus all accrued but unpaid dividends thereon (the
“Series A-1 Liquidation Value”), (ii) the holders of Series A-2 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-2 Preferred equal to the sum of $6.50 (the
“Original Series A-2 Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-2 Preferred, plus all accrued but unpaid dividends thereon (the
“Series A-2 Liquidation Value”), (iii) the holders of Series A-3 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-3 Preferred equal to the sum of $6.50 (the
“Original Series A-3 Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-3 Preferred, plus all accrued but unpaid dividends thereon (the
“Series A-3 Liquidation Value”), (iv) the holders of Series A-4 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-4 Preferred equal to the sum of $6.50 (the
“Original Series A-4 Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-4 Preferred (the “Series A-4 Liquidation Value”), and (v) the
holders of Series A-5 Preferred shall be entitled to be paid out of the assets of
the Corporation an amount with respect to each share of Series X-
0 Xxxxxxxxx equal to the sum of $7.00 (the “Original Series A-5 Issue
Price”), as appropriately adjusted for any future stock
splits, stock
combinations, stock dividends or similar transactions affecting the Series A-5
Preferred, plus all accrued but unpaid dividends thereon (the “Series A-5
Liquidation Value”). If, upon any liquidation, dissolution or winding up, the
assets of the Corporation shall be insufficient to make payment in full to all
holders of Convertible Preferred, then such assets shall be distributed among the
holders of Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred, Series
A-4 Preferred and Series A-5 Preferred at the time outstanding, ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled.
(2) None of the following events shall be considered a liquidation for purposes of
this Section 3: (i) any consolidation or merger of the Corporation with or into any
other corporation or other entity, (ii) any other corporate reorganization, or (iii)
a sale, lease or other disposition of all or substantially all of the assets of the
Corporation.
(d) Redemption Rights.
(a) Optional Redemption. At any time or from time to time on or after June 30, 2003,
the Corporation may redeem all or any portion of the then-outstanding Convertible Preferred at a
redemption price per share (the “Redemption Value”) equal to the greater of (x) Series A-1
Liquidation Value, Series A-2 Liquidation Value, Series A-3 Liquidation Value, Series A-4
Liquidation Value or Series A-5 Liquidation Value, as applicable, or (y) fair market value of the
Convertible Preferred as determined by an independent appraiser mutually acceptable to the
Corporation and the holders collectively of a majority of (i) the shares of Convertible Preferred
plus (ii) the outstanding shares of any other series of Preferred Stock with similar redemption
rights, if so specified in the certificate of designation creating such series of Preferred Stock
(together with the Convertible Preferred, the “Redeemable Shares”).
(b) Mandatory Redemption. At any time on or after June 30, 2003, the holders
collectively of two-thirds of the Redeemable Shares may require the Corporation to redeem all but
not less than all of the then-outstanding Redeemable Shares at a redemption price per share equal
to the Redemption Value by delivering written notice of such election to the Corporation. Upon
receipt of such notice of election, the Corporation shall engage a mutually acceptable appraiser to
determine the Redemption Value and shall call the Redeemable Shares for redemption as of a date not
later than 30 days after such determination. Notwithstanding the foregoing, the holders of
two-thirds of the outstanding shares of Series A-4 Preferred may require the Corporation to redeem
all but not less than all of the then-outstanding Series A-4 Preferred at a redemption price equal
to the Redemption Value applicable to the Series A-4 Preferred at any time on or after June 30,
2003 by delivering written notice of such election to the Corporation. In the event that the
holders of Series A-4 Preferred exercise such mandatory redemption right, the Corporation shall
give prompt notice of such exercise to all other holders of Redeemable Shares, and such holders
shall have the right to require the Corporation to redeem all or any
portion of their Redeemable Shares at the applicable Redemption Values by delivering written notice
of such election to the Corporation within 30 days following delivery of the Corporation’s notice.
(c) Deferral of Redemption Obligation. Notwithstanding any other provision of this
Section 4, the Corporation shall not be obligated to redeem any Redeemable Shares to the extent
that such redemption is not permitted pursuant to the terms of, or would otherwise result in a
default under, any agreement or instrument evidencing indebtedness of the Corporation or its
Subsidiaries. In the event that the Corporation shall be precluded from redeeming all shares which
it would otherwise be obligated to redeem pursuant to the provisions of this Section 4(c), the
Corporation shall redeem the maximum number of Redeemable Shares that it is permitted to redeem
consistent with the terms of such indebtedness and shall thereafter redeem the balance of such
shares at such time or times as such redemption shall be permitted under the terms of such
indebtedness.
(d) Redemption Payments. For each Redeemable Share which is to be redeemed hereunder,
the Corporation shall be obligated on the redemption date to pay to the holder thereof (upon
surrender by such holder at the Corporation’s principal office of the certificate representing such
share) an amount in cash equal to the Redemption Value. If the funds of the Corporation legally
available for redemption of Redeemable Shares are insufficient to redeem the total number of shares
to be redeemed on such date, those funds which are legally available shall be used to redeem the
maximum possible number of shares pro rata among the holders of Redeemable Shares to be redeemed.
At any time thereafter when additional funds of the Corporation are legally available for the
redemption of Redeemable Shares, such funds shall immediately be used to redeem the balance of the
shares which the Corporation has become obligated to redeem but which it has not redeemed.
(e) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Redeemable Shares to each record holder thereof not more than 60 nor less than 30
days prior to the date fixed for redemption thereof. The holders of Redeemable Shares to be
redeemed shall in any event have the right to convert their shares into Common Stock at any time
prior to the close of business on the redemption date. In case fewer than the total number of
shares represented by any certificate are redeemed, a new certificate representing the number of
unredeemed shares shall be issued to the holder thereof without cost to such holder within five
business days after surrender of the certificate representing the redeemed shares.
(f) Determination of the Number of Shares to be Redeemed. In partial redemptions
hereunder, Redeemable Shares shall be redeemed from the holders thereof ratably in proportion to
the amounts they would have received in a full redemption; provided, however, the Corporation shall
not be required to redeem partial shares.
(e) Conversion
Rights.
The holders of the Convertible Preferred shall have the following rights with respect to the
conversion of the Convertible Preferred into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the provisions of this
Section 5, any shares of Convertible Preferred may, at the option of the holder, be converted at
any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common
Stock to which a holder of Series A-1 Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the “Series A-1 Conversion Rate” then in effect (determined as
provided in Section 5(b)) by the number of shares of Series A-1 Preferred being converted. The
number of shares of Common Stock to which a holder of Series A-2 Preferred shall be entitled upon
conversion shall be the product obtained by multiplying the “Series A-2 Conversion Rate” then in
effect (determined as provided in Section 5(b)) by the number of shares of Series A-2 Preferred
being converted. The number of shares of Common Stock to which a holder of Series A-3 Preferred
shall be entitled upon conversion shall be the product obtained by multiplying the “Series A-3
Conversion Rate” then in effect (determined as provided in Section 5(b)) by the number of shares of
Series A-3 Preferred being converted. The number of shares of Common Stock to which a holder of
Series A-4 Preferred shall be entitled upon conversion shall be the product obtained by multiplying
the “Series A-4 Conversion Rate” then in effect (determined as provided in Section 5(b)) by the
number of shares of Series A-4 Preferred being converted. The number of shares of Common Stock to
which a holder of Series A-5 Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the “Series A-5 Conversion Rate” then in effect (determined as provided in
Section 5(b)) by the number of shares of Series A-5 Preferred being converted.
(b) Conversion Rates. The conversion rate in effect at any time for conversion of the
Series A-1 Preferred (the “Series A-1 Conversion Rate”) shall be the quotient obtained by
dividing the Original Series A Issue Price, plus any accrued but unpaid dividends thereon, by the
“Series A Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect
at any time for conversion of the Series A-2 Preferred (the “Series A-2 Conversion Rate”)
shall be the quotient obtained by dividing the Original Series A-2 Issue Price, plus any accrued
but unpaid dividends thereon, by the “Series A-2 Conversion Price” calculated as provided in
Section 5(c). The conversion rate in effect at any time for conversion of the Series A-3
Preferred (the “Series A-3 Conversion Rate”) shall be the quotient determined by dividing
the Original Series A-3 Issue Price, plus any accrued but unpaid dividends thereon, by the “Series
A-3 Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect at any
time for conversion of the Series A-4 Preferred (the “Series A-4 Conversion Rate”) shall be
the quotient determined by dividing the Original Series A-4 Issue Price by the “Series A-4
Conversion Price” determined pursuant to Section 5(d). The conversion rate in effect at any time
for conversion of the Series A-5 Preferred (the “Series A-5 Conversion Rate”) shall be the
quotient determined by dividing the Original Series A-5 Issue Price, plus any accrued but unpaid
dividends thereon, by the “Series A-5 Conversion Price” calculated as provided in Section 5(c).
(c) Series X-0, Xxxxxx X-0, Series A-3 and Series A-5 Conversion Prices. The
conversion price for the Series A-1 Preferred (the “Series A-1 Conversion Price”) shall
initially
be the Original Series A-1 Issue Price, the conversion price for the Series A-2 Preferred (the
“Series A-2 Conversion Price”) shall initially be the Original Series A-2 Issue Price, the
conversion price for the Series A-3 Preferred (the “Series A-3 Conversion Price”) shall
initially by the Original Series A-3 Issue Price, and the conversion price for the Series A-5
Preferred (the “Series A-5 Conversion Price”) shall initially by the Original Series A-5
Issue Price. Such initial Series A-1, Series A-2, Series A-3 and Series A-5 Conversion Prices
shall be adjusted from time to time in accordance with this Section 5. If and whenever after March
13, 1998 (with respect to Series A-1 and Series A-2
Preferred), July 29, 1998 (with respect to
Series A-3 and Series A-4 Preferred), or September ___, 1998 (with respect to Series A-5 Preferred)
(as applicable, the “Original Issue Date”) the Corporation issues or sells, or in
accordance with this Section 5(c) is deemed to have issued or sold, any shares of its Common Stock
(other than pursuant to a Permitted Issuance) for a consideration per share less than any
Conversion Price in effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale or deemed issue or sale such Conversion Price shall be reduced to the
amount determined by dividing (a) the sum of (1) the product derived by multiplying such Conversion
Price as in effect immediately prior to such issue or sale by the number of shares of Common Stock
Deemed Outstanding immediately prior to such issue or sale, plus (2) the consideration, if any,
received or deemed to have been received by the Corporation upon such issue or sale, by (b) the
number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. All
references to the Conversion Prices herein shall mean the Conversion Prices as so adjusted. For
purposes of determining the adjusted Conversion Prices, the following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner grants or sells
any Options and the price per share for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of
such Options, is less than any Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this paragraph, the
“price per share for which Common Stock is issuable” shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for the granting or sale
of such Options, plus the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. In the event of an adjustment to any Conversion Price
as a result of the grant or sale of Options, no further adjustment to such Conversion Price shall
be made when Convertible Securities are actually issued upon the exercise of such Options or when
Common Stock is
actually issued upon the exercise of such Options or the conversion or exchange of the Convertible
Securities issued pursuant to such Options.
(ii) Issuance of Convertible Securities. If the Corporation in any manner issues or
sells any Convertible Securities and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than any Conversion Price in effect immediately prior to the
time of such issue or sale, then for purposes of such Conversion Price the maximum number of shares
of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed
to have been issued and sold by the Corporation at the time
of the issuance or sale of such
Convertible Securities for such price per share; provided, however, that if such Convertible
Securities contain a default or similar provision that provides for the issuance of additional
securities upon the occurrence of a future event, no adjustment will be made to such Conversion
Price with respect to such additional securities until the occurrence of such event. For the
purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be
determined by dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. In the event of an adjustment to any
Conversion Price as a result of the issuance or sale of Convertible Securities, no further
adjustment of such Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustments of such
Conversion Price had been or are to be made pursuant to other provisions of this Section 5, no
further adjustment of such Conversion Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Prices in effect at the time of
such change shall be immediately adjusted to the Conversion Prices which would have been in effect
at such time had such Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the
expiration of any Option or the termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the Conversion Prices then in effect
hereunder shall be adjusted immediately to the Conversion Prices which would have been in effect at
the time of such expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Option or Convertible
Security is issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security
is issued or sold for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration. If any Common
Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities
shall be determined jointly by the Corporation and the holders of a majority of the Convertible
Preferred. If such parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Corporation and the holders of a
majority of the Convertible Preferred. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be borne by the
Corporation.
(vi) Integrated Transactions. In case any Option is issued in connection with the
issue or sale of other securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such Option by the parties thereto,
the Option shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale
of Common Stock.
(d) Series A-4 Conversion Price. Prior to the Determination Date, the Series A-4
Preferred shall not be convertible. Following the Determination Date, the conversion price for the
Series A-4 Preferred (the “Series A-4 Conversion Price”) shall be equal to $10,960,000
divided by the number of “Conversion Shares” determined in accordance with the formula set forth
below. Once the Series A-4 Conversion Price has been determined pursuant to this Section 5(d),
such Conversion Price shall thereafter be subject to adjustment pursuant to Section 5(c) and
Sections 5(e) through (i).
The number of Conversion Shares shall equal Y minus C, where:
C = the number of shares of the Corporation’s fully-diluted Common Stock outstanding as of
the Determination Date, giving effect to the exercise of all outstanding Options (other than
options to purchase up to 5.0% of the fully-diluted Common Stock issued to employees of the
Corporation and its subsidiaries) and the conversion of all Convertible
Securities (other than the Series A-4 Preferred) but without giving effect to the issuance
of any Disqualified Shares;
Y = C / (1 — X); and
X = 50.1% of the Appraised Value of Southeastern Professional Employers, Inc., a
wholly-owned subsidiary of the Corporation (“Southeastern”), divided by the
Appraised Value of the Corporation (including Southeastern), in each case determined as of
the Determination Date.
For purposes of this Section 5(d), (i) “Determination Date” shall mean either December 31,
1998 or December 31, 1999, at the election of the holders of a majority of the outstanding Series
A-4
Preferred made within 30 days following delivery of the Corporation’s audited financial
statements for the fiscal year ending December 31, 1998; (ii) “Appraised Value” shall mean
the fair market value of Southeastern or the Corporation, as applicable, based on prevailing
industry multiples (for the temporary staffing industry in the case of the Corporation and the PEO
industry in the case of Southeastern) of trailing 12-months and projected 12-months Adjusted EBITDA
for the Corporation and Southeastern, respectively, determined by mutual agreement of the
Corporation and the holders of a majority of the outstanding Series A-4 Preferred or, if such
persons are unable to agree upon such value within 30 days following delivery of the Corporation’s
audited financial statements for the fiscal year ending on the Determination Date, by a mutually
acceptable independent appraisal firm selected by such persons (or, if the parties are unable to
agree upon an appraiser, such appraiser shall be selected by the Denver, Colorado office of the
American Arbitration Association); (iii) “Disqualified Shares” shall mean any shares of
Common Stock (or securities convertible into or exercisable for Common Stock) issued by the
Corporation after the date hereof either (x) as consideration for the acquisition by Southeastern
or any of its subsidiaries of any “leased employee” operations, or (y) the proceeds of which are
utilized as consideration for any such acquisition; provided, however, that (A) shares described in
the preceding clause (y) shall constitute Disqualified Shares only after the issuance by the
Corporation of at least $11,450,000 of Series A-3 Preferred and the expenditure by the Corporation
of the proceeds of such issuance, and (B) in the case of an acquisition of a business involving
operations in addition to leased employee operations, the shares described in the preceding clauses
(x) and (y) shall constitute Disqualified Shares only to the extent of (and in proportion to) the
total purchase consideration for such business that is attributable to employee leasing operations,
as determined in good faith by the Corporation’s Board of Directors; and (iv) “Adjusted
EBITDA” shall mean earnings before interest, tax, depreciation and amortization expense,
determined in accordance with generally accepted accounting principles consistently applied,
adjusted to eliminate management fees paid to KRG Capital Partners, LLC, excess compensation
expense paid to former owners of acquired businesses and extraordinary gains and losses. For
purposes of determining Appraised Value, (i) all interest-bearing indebtedness of the Corporation
and Southeastern shall be disregarded, (ii) all corporate overhead expenses of the Corporation
shall be allocated to the Corporation’s subsidiaries on the basis of their respective contributions
to Adjusted EBITDA, and (iii) in the case of Southeastern, Adjusted EBITDA shall include that
portion of Adjusted EBITDA attributable to “leased employee” operations acquired
after the date hereof and shall exclude that portion of Adjusted EBITDA attributable to operations
other than leased employee operations, with the computation of Adjusted EBITDA for leasing
operations reflecting trending workers compensation insurance premium rates and with overhead
expenses allocated among leasing and non-leasing operations in proportion to their respective
contributions to Southeastern’s gross profit or as otherwise agreed by the Corporation and the
holders of a majority of the outstanding Series A-4 Preferred.
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall at any
time or from time to time after the Original Issue Date effect a subdivision of the outstanding
Common Stock, the Conversion Prices in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall it any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number
of shares, the Conversion Prices in effect immediately before the combination shall be
proportionately
increased. Any adjustment under this Section 5(e) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If the Corporation at
any time or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Conversion Prices then in
effect shall be decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying each Conversion Price then
in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date, and (2) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date plus the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the Conversion Prices
shall be recomputed accordingly as of the close of business on such record date and thereafter the
Conversion Prices shall be adjusted pursuant to this Section 5(f) to reflect the actual payment of
such dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. If the Corporation at any time
or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any subsidiary of the Corporation other than shares of
Common Stock, in each such event provision shall be made so that the holders of the Convertible
Preferred shall receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of other securities of the Corporation which they would have
received had the Convertible Preferred been converted into Common Stock on the date of such event
and had they thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Convertible Preferred or with respect to such other securities by
their terms.
(h) Adjustment for Reclassification, Exchange and Substitution. If at any time or
from time to time after the Original Issue Date, the Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Convertible Preferred shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities or property receivable in connection with
such recapitalization, reclassification or other change with respect to the maximum number of
shares of Common Stock into which such shares of Convertible Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all subject to further
adjustments as provided herein or with respect to such other securities or property by the terms
thereof.
(i) Reorganizations, Mergers or Consolidations. If at any time or from time to time
after the Original Issue Date, the Common Stock is converted into other securities or property,
whether pursuant to a reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5), as a part of such transaction provision shall be made so
that the holders of the Convertible Preferred shall thereafter be entitled to receive upon
conversion of such Convertible Preferred the number of shares of stock or other securities or
property to which a holder of the maximum number of shares of Common Stock deliverable upon
conversion would have been entitled in connection with such transaction, subject to adjustment in
respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with respect to the rights of
the holders of Convertible Preferred after the capital reorganization to the end that the
provisions of this Section 5 (including adjustment of the Conversion Prices then in effect and the
number of shares issuable upon conversion of the Convertible Preferred) shall be applicable after
that event and be as nearly equivalent as practicable. The Corporation shall not be a party to any
reorganization, merger or consolidation in which the Corporation is not the surviving entity unless
the entity surviving such transaction assumes, by written instrument satisfactory to the holders of
a majority of the Convertible Preferred, all the Corporation’s obligations hereunder.
(j) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Conversion Prices or the number of shares of Common Stock or other securities issuable upon
conversion of the Convertible Preferred, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Convertible Preferred at the holder’s address as
shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based,
including a statement of (1) the consideration received or deemed to be received by the Corporation
for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (2)
the Conversion Prices in effect before and after such adjustment, (3) the number of additional
shares of Common Stock issued or sold or deemed to have been issued or sold, and (4) the type and
amount, if any, of other property which at the time would be received upon conversion of the
Convertible Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or (ii) any transaction that would result
in an adjustment pursuant to this Section 5, or (iii) any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each holder of
Convertible Preferred at least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on which any such
transaction is expected
to become effective, and (3) the date, if any, that is to be fixed for
determining the holders of record of Common Stock (or other securities) that shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or other property
deliverable upon such transaction.
(l) Automatic Conversion. Each share of Convertible Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Conversion Rates, immediately
upon the closing of an underwritten public offering of Common Stock under the Securities Act of
1933, as amended, that (i) results in proceeds (before underwriting discounts and commissions) to
the Company of at least $15,000,000 and (ii) results in an aggregate valuation of all of the
outstanding shares of Common Stock on a fully diluted basis immediately following the consummation
of such offering of at least $45,000,000.
(m) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Convertible Preferred who desires to convert
the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for
such securities, and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of Convertible Preferred
being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common Stock to which such
holder is entitled. Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Convertible Preferred to
be converted, and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date.
(ii) Automatic Conversion. Upon the occurrence of the event specified in Section 5(l)
above, the outstanding shares of Convertible Preferred shall be converted into Common Stock
automatically without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares
of Convertible Preferred are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon
surrender by any holder of the certificates formerly representing shares of Convertible Preferred
at the office of the Corporation or any transfer agent for such securities, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of shares of Common Stock
into which the shares of Convertible Preferred surrendered were convertible on the date on which
such automatic conversion occurred. Until surrendered as provided above, each certificate formerly
representing shares of Convertible Preferred shall be deemed for all corporate purposes to
represent the number of shares of Common Stock resulting from such automatic conversion.
(n) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of any shares of Convertible Preferred. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Convertible Preferred by a holder
thereof shall be aggregated for purposes of determination whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock’s
fair market value (as determined by the board of directors) on the date of conversion.
(f) Certain Definitions.
“Common Stock Deemed Outstanding” means, at any given time, the sum of the number of
shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock
issuable pursuant to Options and Convertible Securities outstanding on the Original Issue Date to
the extent that such Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been issued pursuant to
subparagraphs 5(c)(i) and 5(c)(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.
“Convertible Securities” means any stock or securities directly or indirectly
convertible into or exchangeable for Common Stock.
“Options” means any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“Permitted Issuance” means (i) any issuance of Common Stock upon conversion of any
shares of Convertible Preferred or upon exercise or conversion of any Options or Convertible
Securities that were originally issued in a Permitted Issuance, (ii) any issuance of warrants to
purchase equity securities of the Corporation in connection with a commercial loan or leasing
transaction approved by the Corporation’s board of directors, (iii) any issuance of Common Stock,
Convertible Securities or Options in connection with the acquisition by the Corporation or its
Subsidiaries of another business enterprise or the assets of another business enterprise approved
by the Corporation’s board of directors, or (iv) any issuance of Common Stock or Options to
officers, directors and employees of the Corporation or its Subsidiaries pursuant to one or more
stock option plans approved by the Corporation’s board of directors.
“Subsidiary” means any corporation of which the shares of outstanding capital stock
possessing the voting power (under ordinary circumstances) in electing the board of directors are,
at the time as of which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.
(g) Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred or Series A-5 Preferred
shall be binding or effective without the prior affirmative vote or written consent of the holders
of two-thirds of the outstanding Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred,
Series A-4 Preferred or Series A-5 Preferred, as applicable, and no change in such terms may be
accomplished by merger or consolidation of the Corporation with another corporation or entity
unless the Corporation has obtained the prior written consent of the holders of two-thirds of the
outstanding Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred
or Series A-5 Preferred, as applicable. Any amendment, modification or waiver of any of the terms
or provisions of any Series of Convertible Preferred approved in the manner described in this
Section 7, whether prospective or retroactively effective, shall be binding upon all holders of
such Series of Convertible Preferred.
(h) Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Convertible Preferred. Upon the surrender of any certificate representing Convertible Preferred at
such place, the Corporation shall, at the request of the record holder of such certificate, execute
and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent such number of
shares as is requested by the holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
(i) Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Convertible Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
(j) Reservation
of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares
of Convertible Preferred, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Convertible Preferred. If at any
time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then-outstanding shares of Convertible Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose.
(k) Notices.
Any notice required by the provisions of this Article V shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All notices to stockholders shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
(l) Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Convertible Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Convertible Preferred so converted
were registered.
(m) No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation.
(n) No Reissuance of Convertible Preferred.
No share or shares of Convertible Preferred acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
C. Transfer Restrictions: The Corporation shall have the right, by appropriate action, to
impose restrictions upon the transfer of any shares of its capital stock, or any interest therein,
from time to time issued, provided that notice of such restrictions shall be set forth upon the
face or back of the certificates representing such shares of capital stock.
D. Preemptive Rights: Except as otherwise agreed to by the Corporation, no shareholder of the
Corporation shall have any preemptive or other right to subscribe for any additional unissued or
treasury shares of capital stock or for other securities of any class, or for rights, warrants or
options to purchase capital stock, or for securities of any kind convertible into or exchangeable
for capital stock.
* * * * *
3. The number of shares of the Corporation’s stock voted in favor of the foregoing amendment
by each voting group entitled to vote separately on the amendment was sufficient for approval by
such voting group.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Articles of Amendment pursuant to Section 0-000-000 of the Colorado Business Corporation Act
as of the 10th day of September, 1998.
| /s/ Xxx Xxxxxxxx | ||
| Xxx Xxxxxxxx | ||
| President |
CERTIFICATE OF DESIGNATION
TO
ARTICLES OF INCORPORATION
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
GLOBAL EMPLOYMENT SOLUTIONS, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Employment Solutions, Inc.
2. The Board of Directors on April 12, 1999, pursuant to authority granted by the Articles of
Incorporation duly adopted the following certificate of designations establishing the preferences,
limitations and relative rights of the Corporation’s Series A-6 Convertible Preferred Stock.
Designation of Series A-6
Convertible Preferred Stock
Convertible Preferred Stock
One Million Two Hundred Thousand (1,200,000) of the Corporation’s authorized shares of
Preferred Stock, $.01 par value, have been designated “Series A-1 Convertible Preferred Stock” (the
“Series A-1 Preferred”), One Hundred Ten Thousand (110,000) of the authorized shares of
Preferred Stock have been designated “Series A-2 Convertible Preferred Stock” (the “Series A-2
Preferred”), Two Million Five Hundred Thousand (2,500,000) of the authorized shares of
Preferred Stock have been designated “Series A-3 Convertible Preferred Stock” (the “Series A-3
Preferred”), One Million Six Hundred Eighty Six Thousand One Hundred Fifty Four (1,686,154) of
the authorized shares of Preferred Stock have been designated “Series A-4 Convertible Preferred
Stock” (the “Series A-4 Preferred”), and One Hundred Forty Two Thousand Eight Hundred Fifty
Seven (142,857) of the authorized shares of Preferred Stock have been designated “Series A-5
Convertible Preferred Stock” (the “Series A-5 Preferred”). One Hundred Thirty Eight
Thousand Sixty Three (138,063) of the authorized shares of Preferred Stock are hereby designated
“Series A-6 Convertible Preferred Stock” (the “Series A-6 Preferred” and collectively with
the Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred and
Series A-5 Preferred, the “Convertible Preferred”). The relative rights, preferences,
privileges, restrictions and other matters relating to the Series A-6 Preferred, are as follows:
1
1. Dividend Rights.
Holders of Series A-6 Preferred, in preference to the holders of the Corporation’s Common
Stock, shall be entitled to receive such dividends and other distributions as may be declared by
the Corporation’s board of directors from time to time, when and as declared by the board of
directors, out of funds legally available therefor. Dividends shall accrue on the Series A-6
Preferred Stock on a daily basis at the rate of 5.0% of Series A-6 Liquidation Value per annum. To
the extent not declared, accrued dividends on the Series A-6 Preferred shall accumulate. No
dividends or distributions shall be paid on the Common Stock (other than dividends payable solely
in shares of Common Stock) unless the Corporation shall also declare and pay to the holders of the
Series A-1, Series A-2, Series A-3, Series A-5 and Series A-6 Preferred, at the same time that it
declares and pays such dividends to the holders of the Common Stock, dividends equal to the greater
of (x) all accrued and unpaid dividends on the Series A-0, Xxxxxx X-0, Series A-3, Series A-5 and
Series A-6 Preferred or (y) the dividends which would have been declared and paid with respect to
the Common Stock issuable upon conversion of the Series A-0, Xxxxxx X-0, Series A-3, Series A-5 and
Series A-6 Preferred had all of the outstanding Convertible Preferred been converted immediately
prior to the record date for such dividend, or if no record date is fixed, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined. No dividends shall
be paid on Series A-6 Preferred unless equivalent dividends (determined on an as-converted basis)
are concurrently paid on all Series A-0, Xxxxxx X-0, Series A-3, Series A-5 and Series A-6
Preferred.
2. Voting Rights.
Except as otherwise required by law, the Series A-6 Preferred shall vote with the shares of
the Common Stock of the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Series A-6 Preferred shall
be entitled to such number of votes as shall be equal to the whole number of shares of Common Stock
into which such holder’s aggregate number of shares of Series A-6 Preferred are convertible
(pursuant to Section 5 below) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
3. Liquidation Rights.
(1) Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any distribution or payment shall be made to the
holders of any shares of Common Stock, the holders of Series A-6 Preferred shall be
entitled to be paid out of the assets of the Corporation an amount with respect to
each share of Series A-6 Preferred equal to the sum of $8.00 (the “Original
Series A-6 Issue Price”), as appropriately adjusted for any future stock splits,
stock combinations, stock dividends or similar transactions affecting the Series A-6
Preferred, plus all accrued but unpaid dividends thereon (the “Series A-6
Liquidation Value”). If, upon any liquidation, dissolution or winding up, the
assets
2
of the Corporation shall be insufficient to make payment in
full to all holders of the Convertible Preferred, then such assets shall be
distributed among the holders of Series A-1 Preferred, Series A-2 Preferred, Series
A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred and Series A-6 Preferred
at the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
(2) None of the following events shall be considered a liquidation for purposes of
this Section 3: (i) any consolidation or merger of the Corporation with or into any
other corporation or other entity, (ii) any other corporate reorganization, or (iii)
a sale, lease or other disposition of all or substantially all of the assets of the
Corporation.
4. Redemption Rights.
(a) Optional Redemption. At any time or from time to time on or after June 30, 2003,
the Corporation may redeem all or any portion of the then-outstanding Series A-6 Preferred at a
redemption price per share (the “Redemption Value”) equal to the greater of (x) Series A-6
Liquidation Value, or (y) fair market value of the Series A-6 Preferred as determined by an
independent appraiser mutually acceptable to the Corporation and the holders collectively of a
majority of (i) the shares of Convertible Preferred plus (ii) the outstanding shares of any other
series of Preferred Stock with similar redemption rights, if so specified in the certificate of
designation creating such series of Preferred Stock (together with the Convertible Preferred, the
“Redeemable Shares”).
(b) Mandatory Redemption. At any time on or after June 30, 2003, the holders
collectively of two-thirds of the Redeemable Shares may require the Corporation to redeem all but
not less than all of the then-outstanding Redeemable Shares at a redemption price per share equal
to the Redemption Value by delivering written notice of such election to the Corporation. Upon
receipt of such notice of election, the Corporation shall engage a mutually acceptable appraiser to
determine the Redemption Value and shall call the Redeemable Shares for redemption as of a date not
later than 30 days after such determination. Notwithstanding the foregoing, the holders of
two-thirds of the outstanding shares of Series A-4 Preferred may require the Corporation to redeem
all but not less than all of the then-outstanding Series A-4 Preferred at a redemption price equal
to the Redemption Value applicable to the Series A-4 Preferred at any time on or after June 30,
2003 by delivering written notice of such election to the Corporation. In the event that the
holders of Series A-4 Preferred exercise such mandatory redemption right, the Corporation shall
give prompt notice of such exercise to all other holders of Redeemable Shares, and such holders
shall have the right to require the Corporation to redeem all or any portion of their Redeemable
Shares at the applicable Redemption Values by delivering written notice of such election to the
Corporation within 30 days following delivery of the Corporation’s notice.
(c) Deferral of Redemption Obligation. Notwithstanding any other provision of this
Section 4, the Corporation shall not be obligated to redeem any Redeemable Shares to the
extent
3
that such redemption is not permitted pursuant to the terms of, or would otherwise result in
a default under, any agreement or instrument evidencing indebtedness of the Corporation or its
Subsidiaries. In the event that the Corporation shall be precluded from redeeming all shares which
it would otherwise be obligated to redeem pursuant to the provisions of this Section 4(c), the
Corporation shall redeem the maximum number of Redeemable Shares that it is permitted to redeem
consistent with the terms of such indebtedness and shall thereafter redeem the balance of such
shares at such time or times as such redemption shall be permitted under the terms of such
indebtedness.
(d) Redemption Payments. For each Redeemable Share which is to be redeemed hereunder,
the Corporation shall be obligated on the redemption date to pay to the holder thereof (upon
surrender by such holder at the Corporation’s principal office of the certificate representing such
share) an amount in cash equal to the Redemption Value. If the funds of the Corporation legally
available for redemption of Redeemable Shares are insufficient to redeem the total number of shares
to be redeemed on such date, those funds which are legally available shall be used to redeem the
maximum possible number of shares pro rata among the holders of Redeemable Shares to be redeemed.
At any time thereafter when additional funds of the Corporation are legally available for the
redemption of Redeemable Shares, such funds shall immediately be used to redeem the balance of the
shares which the Corporation has become obligated to redeem but which it has not redeemed.
(e) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Redeemable Shares to each record holder thereof not more than 60 nor less than 30
days prior to the date fixed for redemption thereof. The holders of Redeemable Shares to be
redeemed shall in any event have the right to convert their shares into Common Stock at any time
prior to the close of business on the redemption date. In case fewer than the total number of
shares represented by any certificate are redeemed, a new certificate representing the number of
unredeemed shares shall be issued to the holder thereof without cost to such holder within five
business days after surrender of the certificate representing the redeemed shares.
(f) Determination of the Number of Shares to be Redeemed. In partial redemptions
hereunder, Redeemable Shares shall be redeemed from the holders thereof ratably in proportion to
the amounts they would have received in a full redemption; provided, however, the Corporation shall
not be required to redeem partial shares.
5. Conversion Rights.
The holders of the Series A-6 Preferred shall have the following rights with respect to the
conversion of the Series A-6 Preferred into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the provisions of this
Section 5, any shares of Series A-6 Preferred may, at the option of the holder, be converted at any
time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common
Stock to which a holder of Series A-6 Preferred shall be entitled upon conversion shall
be the product obtained by multiplying the “Series A-6 Conversion Rate” then in effect (determined
as provided in Section 5(b)) by the number of shares of Series A-6 Preferred being converted.
4
(b) Conversion Rates. The conversion rate in effect at any time for conversion of the
Series A-6 Preferred (the “Series A-6 Conversion Rate”) shall be the quotient determined by
dividing the Original Series A-6 Issue Price, plus any accrued but unpaid dividends thereon, by the
“Series A-6 Conversion Price” calculated as provided in Section 5(c).
(c) Series A-6 Conversion Prices. The conversion price for the Series A-6 Preferred
(the “Series A-6 Conversion Price”) shall initially by the Original Series A-6 Issue Price.
Such initial Series A-6 Conversion Prices shall be adjusted from time to time in accordance with
this Section 5. If and whenever after April 13, 1999 ( the “Original Issue Date”) the
Corporation issues or sells, or in accordance with this Section 5(c) is deemed to have issued or
sold, any shares of its Common Stock (other than pursuant to a Permitted Issuance) for a
consideration per share less than any Conversion Price in effect immediately prior to the time of
such issue or sale, then immediately upon such issue or sale or deemed issue or sale such
Conversion Price shall be reduced to the amount determined by dividing (a) the sum of (1) the
product derived by multiplying such Conversion Price as in effect immediately prior to such issue
or sale by the number of shares of Common Stock Deemed Outstanding immediately prior to such issue
or sale, plus (2) the consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale. All references to the Conversion Prices herein shall mean
the Conversion Prices as so adjusted. For purposes of determining the adjusted Conversion Prices,
the following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner grants or sells
any Options and the price per share for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of
such Options, is less than any Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this paragraph, the
“price per share for which Common Stock is issuable” shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for the granting or sale
of such Options, plus the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such
Options. In the event of an adjustment to any Conversion Price as a result of the grant or sale of
Options, no further adjustment to such Conversion Price shall be made when Convertible Securities
are actually issued upon the exercise of such Options or when Common
5
Stock is actually issued upon
the exercise of such Options or the conversion or exchange of the Convertible Securities issued
pursuant to such Options.
(ii) Issuance of Convertible Securities. If the Corporation in any manner issues or
sells any Convertible Securities and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than any Conversion Price in effect immediately prior to the
time of such issue or sale, then for purposes of such Conversion Price the maximum number of shares
of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed
to have been issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share; provided, however, that if such Convertible
Securities contain a default or similar provision that provides for the issuance of additional
securities upon the occurrence of a future event, no adjustment will be made to such Conversion
Price with respect to such additional securities until the occurrence of such event. For the
purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be
determined by dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. In the event of an adjustment to any
Conversion Price as a result of the issuance or sale of Convertible Securities, no further
adjustment of such Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustments of such
Conversion Price had been or are to be made pursuant to other provisions of this Section 5, no
further adjustment of such Conversion Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Prices in effect at the time of
such change shall be immediately adjusted to the Conversion Prices which would have been in effect
at such time had such Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the
expiration of any Option or the termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the Conversion Prices then in effect
hereunder shall be adjusted immediately to the Conversion Prices which would have been in effect at
the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Option or Convertible
Security is issued or sold or deemed to have been issued or sold for cash, the
6
consideration
received therefor shall be deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security
is issued or sold for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration. If any Common
Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation and the holders of a majority of the Convertible
Preferred. If such parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Corporation and the holders of a
majority of the Convertible Preferred. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be borne by the
Corporation.
(vi) Integrated Transactions. In case any Option is issued in connection with the
issue or sale of other securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such Option by the parties thereto,
the Option shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale
of Common Stock.
(d) [intentionally omitted]
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall at any
time or from time to time after the Original Issue Date effect a subdivision of the outstanding
Common Stock, the Conversion Prices in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall it any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number
of shares, the Conversion Prices in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(e) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If the Corporation at
any time or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Conversion Prices then in
effect shall be decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying each Conversion Price then
in
7
effect by a fraction (1) the numerator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date, and (2) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date plus the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the Conversion Prices
shall be recomputed accordingly as of the close of business on such record date and thereafter the
Conversion Prices shall be adjusted pursuant to this Section 5(f) to reflect the actual payment of
such dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. If the Corporation at any time
or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any subsidiary of the Corporation other than shares of
Common Stock, in each such event provision shall be made so that the holders of the Series A-6
Preferred shall receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of other securities of the Corporation which they would have
received had the Series A-6 Preferred been converted into Common Stock on the date of such event
and had they thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Series A-6 Preferred or with respect to such other securities by
their terms.
(h) Adjustment for Reclassification, Exchange and Substitution. If at any time or
from time to time after the Original Issue Date, the Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Series A-6 Preferred shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities or property receivable in connection with
such recapitalization, reclassification or other change with respect to the maximum number of
shares of Common Stock into which such shares of Series A-6 Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all subject to further
adjustments as provided herein or with respect to such other securities or property by the terms
thereof.
(i) Reorganizations, Mergers or Consolidations. If at any time or from time to time
after the Original Issue Date, the Common Stock is converted into other securities or property,
whether pursuant to a reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5), as a part of such transaction provision shall be made so
that the holders of the Series A-6 Preferred shall thereafter be entitled to receive upon
conversion of such Series A-6 Preferred the number of shares of stock or other securities or
property to which a
8
holder of the maximum number of shares of Common Stock deliverable upon
conversion would have been entitled in connection with such transaction, subject to adjustment in
respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with respect to the rights of
the holders of Series A-6 Preferred after the capital reorganization to the end that the provisions
of this Section 5 (including adjustment of the Conversion Prices then in effect and the number of
shares issuable upon conversion of the Series A-6 Preferred) shall be applicable after that event
and be as nearly equivalent as practicable. The Corporation shall not be a party to any
reorganization, merger or consolidation in which the Corporation is not the surviving entity unless
the entity surviving such transaction assumes, by written instrument satisfactory to the holders of
a majority of the Convertible Preferred, all the Corporation’s obligations hereunder.
(j) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Conversion Prices or the number of shares of Common Stock or other securities issuable upon
conversion of the Series A-6 Preferred, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Series A-6 Preferred at the holder’s address as shown
in the Corporation’s books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based, including a
statement of (1) the consideration received or deemed to be received by the Corporation for any
additional shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the
Conversion Prices in effect before and after such adjustment, (3) the number of additional shares
of Common Stock issued or sold or deemed to have been issued or sold, and (4) the type and amount,
if any, of other property which at the time would be received upon conversion of the Series A-6
Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or (ii) any transaction that would result
in an adjustment pursuant to this Section 5, or (iii) any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each holder of Series
A-6 Preferred at least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on which any such
transaction is expected to become effective, and (3) the date, if any, that is to be fixed for
determining the holders of record of Common Stock (or other securities) that shall be entitled
to exchange their shares of Common Stock (or other securities) for securities or other property
deliverable upon such transaction.
(l) Automatic Conversion. Each share of Series A-6 Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Conversion Rates, immediately
upon the closing of an underwritten public offering of Common Stock under the Securities Act of
1933, as amended, that (i) results in proceeds (before underwriting discounts and commissions) to
the Company of at least $15,000,000 and (ii) results in an aggregate valuation of all
9
of the
outstanding shares of Common Stock on a fully diluted basis immediately following the consummation
of such offering of at least $45,000,000.
(m) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Series A-6 Preferred who desires to convert
the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for
such securities, and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of Series A-6 Preferred
being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common Stock to which such
holder is entitled. Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Series A-6 Preferred to be
converted, and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date.
(ii) Automatic Conversion. Upon the occurrence of the event specified in Section 5(l)
above, the outstanding shares of Series A-6 Preferred shall be converted into Common Stock
automatically without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares
of Series A-6 Preferred are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon
surrender by any holder of the certificates formerly representing shares of Series A-6 Preferred at
the office of the Corporation or any transfer agent for such securities, there shall be issued and
delivered to such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of shares of Common Stock
into which the shares of Series A-6 Preferred surrendered were convertible on the date on which
such automatic conversion occurred. Until surrendered as provided above, each certificate formerly
representing shares of Series A-6 Preferred shall be
deemed for all corporate purposes to represent the number of shares of Common Stock resulting from
such automatic conversion.
(n) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of any shares of Series A-6 Preferred. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Series A-6 Preferred by a holder
thereof shall be aggregated for purposes of determination whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by the
10
Common Stock’s
fair market value (as determined by the board of directors) on the date of conversion.
6. Certain Definitions.
“Common Stock Deemed Outstanding” means, at any given time, the sum of the number of
shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock
issuable pursuant to Options and Convertible Securities outstanding on the Original Issue Date to
the extent that such Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been issued pursuant to
subparagraphs 5(c)(i) and 5(c)(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.
“Convertible Securities” means any stock or securities directly or indirectly
convertible into or exchangeable for Common Stock.
“Options” means any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“Permitted Issuance” means (i) any issuance of Common Stock upon conversion of any
shares of Convertible Preferred or upon exercise or conversion of any Options or Convertible
Securities that were originally issued in a Permitted Issuance, (ii) any issuance of warrants to
purchase equity securities of the Corporation in connection with a commercial loan or leasing
transaction approved by the Corporation’s board of directors, (iii) any issuance of Common Stock,
Convertible Securities or Options in connection with the acquisition by the Corporation or its
Subsidiaries of another business enterprise or the assets of another business enterprise approved
by the Corporation’s board of directors, or (iv) any issuance of Common Stock or Options to
officers, directors and employees of the Corporation or its Subsidiaries pursuant to one or more
stock option plans approved by the Corporation’s board of directors.
“Subsidiary” means any corporation of which the shares of outstanding capital stock
possessing the voting power (under ordinary circumstances) in electing the board of directors are,
at the time as of which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.
11
7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series A-6
Preferred shall be binding or effective without the prior affirmative vote or written consent of
the holders of two-thirds of the outstanding Series A-6 Preferred, and no change in such terms may
be accomplished by merger or consolidation of the Corporation with another corporation or entity
unless the Corporation has obtained the prior written consent of the holders of two-thirds of the
outstanding Series A-6 Preferred. Any amendment, modification or waiver of any of the terms or
provisions of the Series A-6 Preferred approved in the manner described in this Section 7, whether
prospective or retroactively effective, shall be binding upon all holders of Series A-6 Preferred.
8. Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Series A-6 Preferred. Upon the surrender of any certificate representing Series A-6 Preferred at
such place, the Corporation shall, at the request of the record holder of such certificate, execute
and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent such number of
shares as is requested by the holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Series A-6 Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
10. Reservation of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares
of Series A-6 Preferred, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series A-6 Preferred. If at any
time the number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then-outstanding shares of Series A-6 Preferred, the Corporation
will take such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose.
12
11. Notices.
Any notice required by the provisions of this Article V shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All notices to stockholders shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
12. Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series A-6 Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Series A-6 Preferred so converted were registered.
13. No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation.
14. No Reissuance of Series A-6 Preferred.
No share or shares of Series A-6 Preferred acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
* * * * *
13
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Certificate of Designations as of the 12th day
of April, 1999.
| /s/ Xxx Xxxxxxxx | ||
| Xxx Xxxxxxxx | ||
| President |
14
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
Pursuant to Section 0-000-000 of the
Colorado Business Corporation Act
Colorado Business Corporation Act
GLOBAL EMPLOYMENT SOLUTIONS, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Employment Solutions, Inc.
2. The Board of Directors on April 12, 1999, pursuant to authority granted by the Articles of
Incorporation and Section 0-000-000 of the Colorado Business Corporation Act, duly adopted the
following amendment and restatement in its entirety of Article V of the Articles of Incorporation
establishing the preferences, limitations and relative rights of the Corporation’s Series A-6
Convertible Preferred Stock.
3. These Articles of Amendment supersede in its entirety the Certificate of Designation for
the Series A-6 Preferred Stock of the Company.
Article V
A. Authorized Shares: The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is Twenty Million (20,000,000) shares, of which Ten Million
(10,000,000) shares shall constitute Preferred Stock, $.01 par value, and Ten Million (10,000,000)
shares shall constitute Common Stock, $.01 par value.
B. Preferred Stock: The Preferred Stock may be issued from time to time in one or more
classes or series. The board of directors of the Corporation shall have the authority, to the full
extent permitted by the Colorado Business Corporation Act, to designate the Preferred Stock in one
or more classes or series and to fix and determine the relative rights and preferences of such
classes or series so established, including voting, dividend, redemption, liquidation preference
and other rights.
Designation of Series X-0, Xxxxxx X-0, Series A-3, Series A-4 and Series A-6
Convertible Preferred Stock
Convertible Preferred Stock
One Million Two Hundred Thousand (1,200,000) of the Corporation’s authorized shares of
Preferred Stock, $.01 par value, are hereby designated “Series A-1 Convertible Preferred Stock”
(the “Series A-1 Preferred”), One Hundred Ten Thousand (110,000) of the authorized shares
of Preferred Stock are hereby designated “Series A-2 Convertible Preferred Stock” (the “Series
A-2 Preferred”), Two Million Five Hundred Thousand (2,500,000) of the authorized shares of
Preferred Stock are hereby designated “Series A-3 Convertible Preferred Stock” (the “Series A-3
Preferred”), One Million Six Hundred Eighty Six Thousand One Hundred Fifty Four (1,686,154) of
the authorized shares of Preferred Stock are hereby designated “Series A-4 Convertible Preferred
Stock” (the “Series A-4 Preferred”), One Hundred Forty Two Thousand Eight Hundred Fifty
Seven (142,857) of the authorized shares of Preferred Stock are hereby designated “Series A-5
Convertible Preferred Stock” (the “Series A-5 Preferred”), and One Hundred Thirty Eight
Thousand Sixty Three (138,063) of the authorized shares of Preferred Stock are hereby designated
“Series A-6 Convertible Preferred Stock” (the “Series A-6 Preferred”). The relative
rights, preferences, privileges, restrictions and other matters relating to the Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred
and Series A-6 Preferred (collectively, the “Convertible Preferred”) are as follows:
1. Dividend Rights.
Holders of Convertible Preferred, in preference to the holders of the Corporation’s Common
Stock, shall be entitled to receive such dividends and other distributions as may be declared by
the Corporation’s board of directors from time to time, when and as declared by the board of
directors, out of funds legally available therefor. Dividends shall accrue on the Series A-1
Preferred on a daily basis at the rate of 5.0% of Series A-1 Liquidation Value per annum, dividends
shall accrue on the Series A-2 Preferred on a daily basis at the rate of 6.0% of Series A-2
Liquidation Value per annum, dividends shall accrue on the Series A-3 Preferred Stock on a daily
basis at the rate of 5.0% of Series A-3 Liquidation Value per annum, dividends shall accrue on the
Series A-5 Preferred Stock on a daily basis at the rate of 5.0% of Series A-5 Liquidation Value per
annum, and dividends shall accrue on the Series A-6 Preferred Stock on a daily basis at the rate of
5.0% of Series A-6 Liquidation Value per annum. No dividends shall accrue with respect to the
Series A-4 Preferred. To the extent not declared, accrued dividends on the Convertible Preferred
shall accumulate. No dividends or distributions shall be paid on the Common Stock (other than
dividends payable solely in shares of Common Stock) unless the Corporation shall also declare and
pay to the holders of the Series A-1, Series A-2, Series A-3, Series A-5 and Series A-6 Preferred,
at the same time that it declares and pays such dividends to the holders of the Common Stock,
dividends equal to the greater of (x) all accrued and unpaid dividends on the Series X-0, Xxxxxx
X-0, Series A-3, Series A-5 and Series A-6 Preferred or (y) the dividends which would have been
declared and paid with respect to the Common Stock issuable upon conversion of the Series X-0,
Xxxxxx X-0, Series A-3, Series A-5 and Series A-6 Preferred had all of the outstanding Convertible
Preferred been converted immediately prior to the record date for such dividend, or if no record
date is fixed, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined. No dividends shall be
paid on any Series X-0, Xxxxxx X-0, Series A-3, Series A-5 or Series A-6 Preferred unless
equivalent dividends (determined on an as-converted basis) are concurrently paid on all Series X-0,
Xxxxxx X-0, Series A-3, Series A-5 and Series A-6 Preferred.
2. Voting Rights.
Except as otherwise required by law, the Convertible Preferred shall vote with the shares of
the Common Stock of the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Convertible Preferred
shall be entitled to such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder’s aggregate number of shares of Convertible Preferred are convertible
(pursuant to Section 5 below) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent. Notwithstanding the foregoing, prior
to the determination of the Conversion Rate applicable to the Series A-4 Preferred, the Series A-4
Preferred shall be entitled to one vote per share.
3. Liquidation Rights.
(1) Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any distribution or payment shall be made to the
holders of any shares of Common Stock, (i) the holders of
Series A-1 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-1 Preferred equal to the sum of $5.28 (the
“Original Series A Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-1 Preferred, plus all accrued but unpaid dividends thereon (the
“Series A-1 Liquidation Value”), (ii) the holders of Series A-2 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-2 Preferred equal to the sum of $6.50 (the
“Original Series A-2 Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-2 Preferred, plus all accrued but unpaid dividends thereon (the
“Series A-2 Liquidation Value”), (iii) the holders of Series A-3 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-3 Preferred equal to the sum of $6.50 (the
“Original Series A-3 Issue Price”), as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions affecting
the Series A-3 Preferred, plus all accrued but unpaid dividends thereon (the
“Series A-3 Liquidation Value”), (iv) the holders of Series A-4 Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series A-4 Preferred equal to the sum of $6.50 (the
“Original Series A-4 Issue Price”), as appropriately
adjusted for any future stock splits, stock combinations, stock dividends or similar
transactions affecting the Series A-4 Preferred (the “Series A-4 Liquidation
Value”), (v) the holders of Series A-5 Preferred shall be entitled to be paid
out of the assets of the Corporation an amount with respect to each share of Series
A-5 Preferred equal to the sum of $7.00 (the “Original Series A-5 Issue
Price”), as appropriately adjusted for any future stock splits, stock
combinations, stock dividends or similar transactions affecting the Series A-5
Preferred, plus all accrued but unpaid dividends thereon (the “Series A-5
Liquidation Value”), and (vi) the holders of Series A-6 Preferred shall be
entitled to be paid out of the assets of the Corporation an amount with respect to
each share of Series A-6 Preferred equal to the sum of $8.00 (the “Original
Series A-6 Issue Price”), as appropriately adjusted for any future stock splits,
stock combinations, stock dividends or similar transactions affecting the Series A-6
Preferred, plus all accrued but unpaid dividends thereon (the “Series A-6
Liquidation Value”). If, upon any liquidation, dissolution or winding up, the
assets of the Corporation shall be insufficient to make payment in full to all
holders of Convertible Preferred, then such assets shall be distributed among the
holders of Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred, Series
A-4 Preferred, Series A-5 Preferred and Series A-6 Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would otherwise
be respectively entitled.
(2) None of the following events shall be considered a liquidation for purposes of
this Section 3: (i) any consolidation or merger of the Corporation with or into any
other corporation or other entity, (ii) any other corporate
reorganization, or (iii)
a sale, lease or other disposition of all or substantially all of the assets of the
Corporation.
4. Redemption Rights.
(a) Optional Redemption. At any time or from time to time on or after June 30, 2003,
the Corporation may redeem all or any portion of the then-outstanding Convertible Preferred at a
redemption price per share (the “Redemption Value”) equal to the greater of (x) Series A-1
Liquidation Value, Series A-2 Liquidation Value, Series A-3 Liquidation Value, Series A-4
Liquidation Value, Series A-5 Liquidation Value or Series A-6 Liquidation Value, as applicable, or
(y) fair market value of the Convertible Preferred as determined by an independent appraiser
mutually acceptable to the Corporation and the holders collectively of a majority of (i) the shares
of Convertible Preferred plus (ii) the outstanding shares of any other series of Preferred Stock
with similar redemption rights, if so specified in the certificate of designation creating such
series of Preferred Stock (together with the Convertible Preferred, the “Redeemable
Shares”).
(b) Mandatory Redemption. At any time on or after June 30, 2003, the holders
collectively of two-thirds of the Redeemable Shares may require the Corporation to
redeem all but not less than all of the then-outstanding Redeemable Shares at a redemption price
per share equal to the Redemption Value by delivering written notice of such election to the
Corporation. Upon receipt of such notice of election, the Corporation shall engage a mutually
acceptable appraiser to determine the Redemption Value and shall call the Redeemable Shares for
redemption as of a date not later than 30 days after such determination. Notwithstanding the
foregoing, the holders of two-thirds of the outstanding shares of Series A-4 Preferred may require
the Corporation to redeem all but not less than all of the then-outstanding Series A-4 Preferred at
a redemption price equal to the Redemption Value applicable to the Series A-4 Preferred at any time
on or after June 30, 2003 by delivering written notice of such election to the Corporation. In the
event that the holders of Series A-4 Preferred exercise such mandatory redemption right, the
Corporation shall give prompt notice of such exercise to all other holders of Redeemable Shares,
and such holders shall have the right to require the Corporation to redeem all or any portion of
their Redeemable Shares at the applicable Redemption Values by delivering written notice of such
election to the Corporation within 30 days following delivery of the Corporation’s notice.
(c) Deferral of Redemption Obligation. Notwithstanding any other provision of this
Section 4, the Corporation shall not be obligated to redeem any Redeemable Shares to the extent
that such redemption is not permitted pursuant to the terms of, or would otherwise result in a
default under, any agreement or instrument evidencing indebtedness of the Corporation or its
Subsidiaries. In the event that the Corporation shall be precluded from redeeming all shares which
it would otherwise be obligated to redeem pursuant to the provisions of this Section 4(c), the
Corporation shall redeem the maximum number of Redeemable Shares that it is permitted to redeem
consistent with the terms of such indebtedness and shall thereafter redeem the balance of such
shares at such time or times as such redemption shall be permitted under the terms of such
indebtedness.
(d) Redemption Payments. For each Redeemable Share which is to be redeemed hereunder,
the Corporation shall be obligated on the redemption date to pay to the holder thereof (upon
surrender by such holder at the Corporation’s principal office of the certificate representing such
share) an amount in cash equal to the Redemption Value. If the funds of the Corporation legally
available for redemption of Redeemable Shares are insufficient to redeem the total number of shares
to be redeemed on such date, those funds which are legally available shall be used to redeem the
maximum possible number of shares pro rata among the holders of Redeemable Shares to be redeemed.
At any time thereafter when additional funds of the Corporation are legally available for the
redemption of Redeemable Shares, such funds shall immediately be used to redeem the balance of the
shares which the Corporation has become obligated to redeem but which it has not redeemed.
(e) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Redeemable Shares to each record holder thereof not more than 60 nor less than 30
days prior to the date fixed for redemption thereof. The holders of Redeemable Shares to be
redeemed shall in any event have the right to convert their shares into Common Stock at any time
prior to the close of business on the redemption date. In case fewer than the total number of
shares represented by any certificate are redeemed, a new certificate representing the number of
unredeemed shares shall be issued to the holder thereof without cost to such holder within five
business days after surrender of the certificate representing the redeemed shares.
(f) Determination of the Number of Shares to be Redeemed. In partial redemptions
hereunder, Redeemable Shares shall be redeemed from the holders thereof ratably in proportion to
the amounts they would have received in a full redemption; provided, however, the Corporation shall
not be required to redeem partial shares.
5. Conversion Rights.
The holders of the Convertible Preferred shall have the following rights with respect to the
conversion of the Convertible Preferred into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the provisions of this
Section 5, any shares of Convertible Preferred may, at the option of the holder, be converted at
any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common
Stock to which a holder of Series A-1 Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the “Series A-1 Conversion Rate” then in effect (determined as
provided in Section 5(b)) by the number of shares of Series A-1 Preferred being converted. The
number of shares of Common Stock to which a holder of Series A-2 Preferred shall be entitled upon
conversion shall be the product obtained by multiplying the “Series A-2 Conversion Rate” then in
effect (determined as provided in Section 5(b)) by the number of shares of Series A-2 Preferred
being converted. The number of shares of Common Stock to which a holder of Series A-3 Preferred
shall be entitled upon conversion shall be the product obtained by multiplying the “Series A-3
Conversion Rate” then in effect (determined as provided in Section 5(b)) by the number of shares of
Series A-3 Preferred being converted. The number of shares of Common Stock to which a holder of
Series A-4 Preferred shall be entitled upon conversion shall be the product obtained by multiplying
the “Series A-4 Conversion Rate” then in effect (determined as provided in Section 5(b)) by the
number of shares of Series A-4 Preferred being converted. The number of shares of Common Stock to
which a holder of Series A-5 Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the “Series A-5 Conversion Rate” then in effect (determined as provided in
Section 5(b)) by the number of shares of Series A-5 Preferred being converted. The number of
shares of Common Stock to which a holder of Series A-6 Preferred shall be entitled upon conversion
shall be the product obtained by multiplying the “Series A-6 Conversion Rate” then in effect
(determined as provided in Section 5(b)) by the number of shares of Series A-6 Preferred being
converted.
(b) Conversion Rates. The conversion rate in effect at any time for conversion of the
Series A-1 Preferred (the “Series A-1 Conversion Rate”) shall be the quotient obtained by
dividing the Original Series A Issue Price, plus any accrued but unpaid dividends thereon, by the
“Series A Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect
at any time for conversion of the Series A-2 Preferred (the “Series A-2 Conversion Rate”)
shall be the quotient obtained by dividing the Original Series A-2 Issue Price, plus any accrued
but
unpaid dividends thereon, by the “Series A-2 Conversion Price” calculated as provided in Section
5(c). The conversion rate in effect at any time for conversion of the Series A-3 Preferred (the
“Series A-3 Conversion Rate”) shall be the quotient determined by dividing the Original
Series A-3 Issue Price, plus any accrued but unpaid dividends thereon, by the “Series A-3
Conversion Price” calculated as provided in Section 5(c). The conversion rate in effect at any
time for conversion of the Series A-4 Preferred (the “Series A-4 Conversion Rate”) shall be
the quotient determined by dividing the Original Series A-4 Issue Price by the “Series A-4
Conversion Price” determined pursuant to Section 5(d). The conversion rate in effect at any time
for conversion of the Series A-5 Preferred (the “Series A-5 Conversion Rate”) shall be the
quotient determined by dividing the Original Series A-5 Issue Price, plus any accrued but unpaid
dividends thereon, by the “Series A-5 Conversion Price” calculated as provided in Section 5(c).
The conversion rate in effect at any time for conversion of the Series A-6 Preferred (the
“Series A-6 Conversion Rate”) shall be the quotient determined by dividing the Original
Series A-6 Issue Price, plus any accrued but unpaid dividends thereon, by the “Series A-6
Conversion Price” calculated as provided in Section 5(c).
(c) Series X-0, Xxxxxx X-0, Series A-3, Series A-5 and Series A-6 Conversion Prices.
The conversion price for the Series A-1 Preferred (the “Series A-1 Conversion Price”) shall
initially be the Original Series A-1 Issue Price, the conversion price for the Series A-2 Preferred
(the “Series A-2 Conversion Price”) shall initially be the Original Series A-2 Issue Price,
the conversion price for the Series A-3 Preferred (the “Series A-3 Conversion Price”) shall
initially by the Original Series A-3 Issue Price, the conversion price for the Series A-5 Preferred
(the “Series A-5 Conversion Price”) shall initially by the Original Series A-5 Issue Price,
and the conversion price for the Series A-6 Preferred (the “Series A-6 Conversion Price”)
shall initially by the Original Series A-6 Issue Price. Such initial Series A-1, Series A-2,
Series A-3, Series A-5 and Series A-6 Conversion Prices shall be adjusted from time to time in
accordance with this Section 5. If and whenever after March 13, 1998 (with respect to Series A-1
and Series A-2 Preferred), July 29, 1998 (with respect to Series A-3 and Series A-4 Preferred),
September 11, 1998 (with respect to Series A-5 Preferred) or April 13, 1999 (with respect to Series
A-6 Preferred) (as applicable, the “Original Issue Date”) the
Corporation issues or sells,
or in accordance with this Section 5(c) is deemed to have issued or sold, any shares of its Common
Stock (other than pursuant to a Permitted Issuance) for a consideration per share less than any
Conversion Price in effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale or deemed issue or sale such Conversion Price shall be reduced to the
amount determined by dividing (a) the sum of (1) the product derived by multiplying such Conversion
Price as in effect immediately prior to such issue or sale by the number of shares of Common Stock
Deemed Outstanding immediately prior to such issue or sale, plus (2) the consideration, if any,
received or deemed to have been received by the Corporation upon such issue or sale, by (b) the
number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. All
references to the Conversion Prices herein shall mean the Conversion Prices as so adjusted. For
purposes of determining the adjusted Conversion Prices, the following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner grants or sells
any Options and the price per share for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of
such Options, is less than any Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this paragraph, the
“price per share for which Common Stock is issuable” shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for the granting or sale
of such Options, plus the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. In the event of an adjustment to any Conversion Price
as a result of the grant or sale of Options, no further adjustment to such Conversion Price shall
be made when Convertible Securities are actually issued upon the exercise of such Options or when
Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of
the Convertible Securities issued pursuant to such Options.
(ii) Issuance of Convertible Securities. If the Corporation in any manner issues or
sells any Convertible Securities and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than any Conversion Price in effect immediately prior to the
time of such issue or sale, then for purposes of such Conversion Price the maximum number of shares
of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed
to have been issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share; provided, however, that if such Convertible
Securities contain a default or similar provision that provides for the
issuance of additional
securities upon the occurrence of a future event, no adjustment will be made to such Conversion
Price with respect to such additional securities until the occurrence of such event. For the
purposes of this paragraph, the “price per share for which Common Stock is issuable” shall be
determined by dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. In the event of an adjustment to any
Conversion Price as a result of the issuance or sale of Convertible Securities, no further
adjustment of such Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of such Conversion Price had been or are to be made pursuant to other provisions of
this Section 5, no further adjustment of such Conversion Price shall be made by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Prices in effect at the time of
such change shall be immediately adjusted to the Conversion Prices which would have been in effect
at such time had such Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the
expiration of any Option or the termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the Conversion Prices then in effect
hereunder shall be adjusted immediately to the Conversion Prices which would have been in effect at
the time of such expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Option or Convertible
Security is issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security
is issued or sold for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration. If any Common
Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation and the holders of a majority of the Convertible
Preferred. If such parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser
experienced in
valuing such type of consideration jointly selected by the Corporation and the holders of a
majority of the Convertible Preferred. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be borne by the
Corporation.
(vi) Integrated Transactions. In case any Option is issued in connection with the
issue or sale of other securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such Option by the parties thereto,
the Option shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale
of Common Stock.
(d) Series A-4 Conversion Price. Prior to the Determination Date, the Series A-4
Preferred shall not be convertible. Following the Determination Date, the conversion price for the
Series A-4 Preferred (the “Series A-4 Conversion Price”) shall be equal to $10,960,000
divided by the number of “Conversion Shares” determined in accordance with the formula set forth
below. Once the Series A-4 Conversion Price has been determined pursuant to this Section 5(d),
such Conversion Price shall thereafter be subject to adjustment pursuant to Section 5(c) and
Sections 5(e) through (i).
The number of Conversion Shares shall equal Y minus C, where:
C = the number of shares of the Corporation’s fully-diluted Common Stock outstanding as of
the Determination Date, giving effect to the exercise of all outstanding Options (other than
options to purchase up to 5.0% of the fully-diluted Common Stock issued to employees of the
Corporation and its subsidiaries) and the conversion of all Convertible Securities (other
than the Series A-4 Preferred) but without giving effect to the issuance of any Disqualified
Shares;
Y = C / (1 — X); and
X = 50.1% of the Appraised Value of Southeastern Professional Employers, Inc., a
wholly-owned subsidiary of the Corporation (“Southeastern”), divided by the
Appraised Value of the Corporation (including Southeastern), in each case determined as of
the Determination Date.
For purposes of this Section 5(d), (i) “Determination Date” shall mean either December 31,
1998 or December 31, 1999, at the election of the holders of a majority of the outstanding Series
A-4 Preferred made within 30 days following delivery of the Corporation’s audited financial
statements for the fiscal year ending December 31, 1998; (ii) “Appraised Value” shall mean
the fair market value of Southeastern or the Corporation, as applicable, based on prevailing
industry multiples (for
the temporary staffing industry in the case of the Corporation and the PEO
industry in the case of Southeastern) of trailing 12-months and projected 12-months Adjusted EBITDA
for the Corporation and Southeastern, respectively, determined by mutual agreement of the
Corporation and the holders of a majority of the outstanding Series A-4 Preferred or, if such
persons are unable to agree upon such value within 30 days following delivery of the Corporation’s
audited financial statements for the fiscal year ending on the Determination Date, by a mutually
acceptable independent appraisal firm selected by such persons (or, if the parties are unable to
agree upon an appraiser, such appraiser shall be selected by the Denver, Colorado office of the
American Arbitration Association); (iii) “Disqualified Shares” shall mean any shares of
Common Stock (or securities convertible into or exercisable for Common Stock) issued by the
Corporation after the date hereof either (x) as consideration for the acquisition by Southeastern
or any of its subsidiaries of any “leased employee” operations, or (y) the proceeds of which are
utilized as consideration for any such acquisition; provided, however, that (A) shares described in
the preceding clause (y) shall constitute Disqualified Shares only after the issuance by the
Corporation of at least $11,450,000 of Series A-3 Preferred and the expenditure by the Corporation
of the proceeds of such issuance, and (B) in the case of an acquisition of a business involving
operations in addition to leased employee operations, the shares described in the preceding clauses
(x) and (y) shall constitute Disqualified Shares only to the extent of (and in proportion to) the
total purchase consideration for such business that is attributable to employee leasing operations,
as determined in good faith by the Corporation’s Board of Directors; and (iv) “Adjusted
EBITDA” shall mean earnings before interest, tax, depreciation and amortization expense,
determined in accordance with generally accepted accounting principles consistently applied,
adjusted to eliminate management fees paid to KRG Capital Partners, LLC, excess compensation
expense paid to former owners of acquired businesses and extraordinary gains and losses. For
purposes of determining Appraised Value, (i) all interest-bearing indebtedness of the Corporation
and Southeastern shall be disregarded, (ii) all corporate overhead expenses of the Corporation
shall be allocated to the Corporation’s subsidiaries on the basis of their respective contributions
to Adjusted EBITDA, and (iii) in the case of Southeastern, Adjusted EBITDA shall include that
portion of Adjusted EBITDA attributable to “leased employee” operations acquired after the date
hereof and shall exclude that portion of Adjusted EBITDA attributable to operations other than
leased employee operations, with the computation of Adjusted EBITDA for leasing operations
reflecting trending workers compensation insurance premium rates and with overhead expenses
allocated among leasing and non-leasing operations in proportion to their respective contributions
to Southeastern’s gross profit or as otherwise agreed by the Corporation and the holders of a
majority of the outstanding Series A-4 Preferred.
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall at any
time or from time to time after the Original Issue Date effect a subdivision of the outstanding
Common Stock, the Conversion Prices in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall it any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number
of shares, the Conversion Prices in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(e) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If the Corporation at
any time or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Conversion Prices then in
effect shall be decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying each Conversion Price then
in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on
such record date, and (2) the denominator of which is the total number
of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution; provided, however, that if such record date is fixed and
such dividend is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Prices shall be recomputed accordingly as of the close of business on such
record date and thereafter the Conversion Prices shall be adjusted pursuant to this Section 5(f) to
reflect the actual payment of such dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. If the Corporation at any time
or from time to time after the Original Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any subsidiary of the Corporation other than shares of
Common Stock, in each such event provision shall be made so that the holders of the Convertible
Preferred shall receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of other securities of the Corporation which they would have
received had the Convertible Preferred been converted into Common Stock on the date of such event
and had they thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Convertible Preferred or with respect to such other securities by
their terms.
(h) Adjustment for Reclassification, Exchange and Substitution. If at any time or
from time to time after the Original Issue Date, the Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Convertible Preferred shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities or property receivable in connection with
such recapitalization, reclassification or other change with respect to the maximum number of
shares of Common Stock into which such shares of Convertible Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all subject to further
adjustments as provided herein or with respect to such other securities or property by the terms
thereof.
(i) Reorganizations, Mergers or Consolidations. If at any time or from time to time
after the Original Issue Date, the Common Stock is converted into other securities or property,
whether pursuant to a reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5), as a part of such transaction provision shall be made so
that the holders of the Convertible Preferred shall thereafter be entitled to receive upon
conversion of such Convertible Preferred the number of shares of stock or other securities or
property to which a holder of the maximum number of shares of Common Stock deliverable upon
conversion would have been entitled in connection with such transaction, subject to
adjustment in respect of such stock or securities by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of Convertible Preferred after the capital reorganization to
the end that the provisions of this Section 5 (including adjustment of the Conversion Prices then
in effect and the number of shares issuable upon conversion of the Convertible Preferred) shall be
applicable after that event and be as nearly equivalent as practicable. The Corporation shall not
be a party to any reorganization, merger or consolidation in which the Corporation is not the
surviving entity unless the entity surviving such transaction assumes, by written instrument
satisfactory to the holders of a majority of the Convertible Preferred, all the Corporation’s
obligations hereunder.
(j) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Conversion Prices or the number of shares of Common Stock or other securities issuable upon
conversion of the Convertible Preferred, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Convertible Preferred at the holder’s address as
shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based, including a
statement of (1) the consideration received or deemed to be received by the Corporation for any
additional shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the
Conversion Prices in effect before and after such adjustment, (3) the number of additional shares
of Common Stock issued or sold or deemed to have been issued or sold, and (4) the type and amount,
if any, of other property which at the time would be received upon conversion of the Convertible
Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or (ii) any transaction that would result
in an adjustment pursuant to this Section 5, or (iii) any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each holder of
Convertible Preferred at least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on which any such
transaction is expected to become effective, and (3) the date, if any, that is to be fixed for
determining the holders of record of Common Stock (or other securities) that shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or other property
deliverable upon such transaction.
(l) Automatic Conversion. Each share of Convertible Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Conversion Rates, immediately
upon the closing of an underwritten public offering of Common Stock under the Securities Act of
1933, as amended, that (i) results in proceeds (before underwriting discounts and commissions) to
the Company of at least $15,000,000 and (ii) results
in an aggregate valuation of all of the outstanding shares of Common Stock on a fully diluted basis
immediately following the consummation of such offering of at least $45,000,000.
(m) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Convertible Preferred who desires to convert
the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for
such securities, and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of Convertible Preferred
being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common Stock to which such
holder is entitled. Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Convertible Preferred to
be converted, and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date.
(ii) Automatic Conversion. Upon the occurrence of the event specified in Section 5(l)
above, the outstanding shares of Convertible Preferred shall be converted into Common Stock
automatically without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares
of Convertible Preferred are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon
surrender by any holder of the certificates formerly representing shares of Convertible Preferred
at the office of the Corporation or any transfer agent for such securities, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of shares of Common Stock
into which the shares of Convertible Preferred surrendered were convertible on the date on which
such automatic conversion occurred. Until surrendered as provided above, each certificate formerly
representing shares of Convertible Preferred shall be deemed for all corporate purposes to
represent the number of shares of Common Stock resulting from such automatic conversion.
(n) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of any shares of Convertible Preferred. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Convertible Preferred by a holder
thereof shall be aggregated for purposes of determination whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction multiplied by the
Common Stock’s fair market value (as determined by the board of directors) on the date of
conversion.
6. Certain Definitions.
“Common Stock Deemed Outstanding” means, at any given time, the sum of the number of
shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock
issuable pursuant to Options and Convertible Securities outstanding on the Original Issue Date to
the extent that such Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been issued pursuant to
subparagraphs 5(c)(i) and 5(c)(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.
“Convertible Securities” means any stock or securities directly or indirectly
convertible into or exchangeable for Common Stock.
“Options” means any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“Permitted Issuance” means (i) any issuance of Common Stock upon conversion of any
shares of Convertible Preferred or upon exercise or conversion of any Options or Convertible
Securities that were originally issued in a Permitted Issuance, (ii) any issuance of warrants to
purchase equity securities of the Corporation in connection with a commercial loan or leasing
transaction approved by the Corporation’s board of directors, (iii) any issuance of Common Stock,
Convertible Securities or Options in connection with the acquisition by the Corporation or its
Subsidiaries of another business enterprise or the assets of another business enterprise approved
by the Corporation’s board of directors, or (iv) any issuance of Common Stock or Options to
officers, directors and employees of the Corporation or its Subsidiaries pursuant to one or more
stock option plans approved by the Corporation’s board of directors.
“Subsidiary” means any corporation of which the shares of outstanding capital stock
possessing the voting power (under ordinary circumstances) in electing the board of directors are,
at the time as of which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.
7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred
or Series A-6 Preferred shall be binding or effective without the prior affirmative vote or written
consent of the holders of two-thirds of the outstanding Series A-1 Preferred, Series A-2 Preferred,
Series A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred or Series A-6 Preferred, as
applicable, and no change in such terms may be accomplished by merger or
consolidation of the Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of two-thirds of the outstanding Series A-1
Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred
or Series A-6 Preferred, as applicable. Any amendment, modification or waiver of any of the terms
or provisions of any Series of Convertible Preferred approved in the manner described in this
Section 7, whether prospective or retroactively effective, shall be binding upon all holders of
such Series of Convertible Preferred.
8. Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Convertible Preferred. Upon the surrender of any certificate representing Convertible Preferred at
such place, the Corporation shall, at the request of the record holder of such certificate, execute
and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent such number of
shares as is requested by the holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Convertible Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
10. Reservation of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares
of Convertible Preferred, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Convertible Preferred. If at any
time
the number of authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then-outstanding shares of Convertible Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose.
11. Notices.
Any notice required by the provisions of this Article V shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All notices to stockholders shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
12. Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Convertible Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Convertible Preferred so converted were registered.
13. No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation.
14. No Reissuance of Convertible Preferred.
No share or shares of Convertible Preferred acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
C. Transfer Restrictions: The Corporation shall have the right, by appropriate action, to
impose restrictions upon the transfer of any shares of its capital stock, or any interest therein,
from time to time issued, provided that notice of such restrictions shall be set forth upon the
face or back of the certificates representing such shares of capital stock.
D. Preemptive Rights: Except as otherwise agreed to by the Corporation, no shareholder of the
Corporation shall have any preemptive or other right to subscribe for any
additional unissued or
treasury shares of capital stock or for other securities of any class, or for rights, warrants or
options to purchase capital stock, or for securities of any kind convertible into or exchangeable
for capital stock.
* * * * *
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Articles of Amendment pursuant to Section 0-000-000 of the Colorado Business Corporation Act
as of the 13th day of April, 1999. The undersigned further certifies that pursuant to
Section 0-000-000 of the Colorado Business Corporation Act, shareholder approval was not required
for this amendment.
| Xxx Xxxxxxxx | ||||
| President |
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
Pursuant to Section 0-000-000 of the
Colorado Business Corporation Act
Colorado Business Corporation Act
GLOBAL EMPLOYMENT SOLUTIONS, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Employment Solutions, Inc.
2. The Board of Directors on April 4, 2002, pursuant to authority granted by the Articles of
Incorporation and Section 0-000-000 of the Colorado Business Corporation Act, duly adopted the
following amendment and restatement in its entirety of Article V of the Articles of Incorporation
converting each outstanding class of preferred stock into a single class of Series C Convertible
Preferred Stock and establishing the preferences, limitations and relative rights of the
Corporation’s Series D Convertible Preferred Stock.
3. The amendment and restatement of Article V of the Articles of Incorporation was duly
approved and adopted at a meeting of the shareholders of the Corporation on May 9, 2002.
4. These Articles of Amendment supersede in its entirety the existing Article V of the
Articles of Incorporation of the Corporation.
Article V
A. Authorized Shares: The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is Sixty Million (60,000,000) shares, of which Fifty Million shares
shall constitute Preferred Stock, $.01 par value, and Ten Million (10,000,000) shares shall
constitute Common Stock, $.01 par value.
B. Preferred Stock: The Preferred Stock may be issued from time to time in one or more
classes or series. The board of directors of the Corporation shall have the authority, to the full
extent permitted by the Colorado Business Corporation Act, to designate the Preferred Stock in one
or more classes or series and to fix and determine the relative rights and preferences of such
classes or series so established, including voting, dividend, redemption, liquidation
preference and other rights. All outstanding shares of Series A Preferred Stock and Series B
Preferred Stock (of any class) are, simultaneously with the effectiveness of this Amendment, being
retired and are of no further force and effect.
Designation of Series C and Series D
Preferred Stock
Preferred Stock
Seven Million (7,000,000) of the Corporation’s authorized shares of Preferred Stock, $.01 par
value, are hereby designated “Series C Preferred Stock” (the “Series C Preferred”), and
Thirty Million (30,000,000) of the authorized shares of Preferred Stock are hereby designated
“Series D Preferred Stock” (the “Series D Preferred”). The relative rights, preferences,
privileges, restrictions and other matters relating to the Series C Preferred and Series D
Preferred (collectively, the “Preferred Stock”) are as follows:
1. Dividend Rights.
No dividends shall be paid on the Common Stock for so long as any class of Preferred Stock is
outstanding.
2. Voting Rights.
Except as otherwise required by law, the Preferred Stock shall vote with the shares of the
Common Stock of the Corporation (and not as a separate class) at any annual or special meeting of
stockholders of the Corporation, and may act by written consent in the same manner as the Common
Stock with each share being entitled to one vote per share.
3. Liquidation Rights.
(1) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of any shares of
Common Stock, (i) the holders of Series C Preferred shall be entitled to be paid out of the assets
of the Corporation an amount with respect to each share of Series C Preferred equal to the sum of
$1.00 (the “Original Series C Issue Price”), as appropriately adjusted for any future stock
splits, stock combinations, stock dividends or similar transactions affecting the Series C
Preferred (the “Series C Liquidation Value”), and (ii) the holders of Series D Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with respect to each
share of Series D Preferred equal to the sum of $1.00 (the “Original Series D Issue
Price”), as appropriately adjusted for any future stock splits, stock combinations, stock
dividends or similar transactions affecting the Series D Preferred (the “Series D Liquidation
Value”). If, upon any liquidation, dissolution or winding up, the assets of the Corporation
shall be insufficient to make payment in full to all holders of Preferred Stock, then such assets
shall be distributed among the holders of Series C Preferred prior to any amount being distributed
to holders of Series D Preferred at the time outstanding, in each case ratably in proportion to
the full amounts to which they would otherwise be respectively entitled.
(2) None of the following events shall be considered a liquidation for
purposes of this Section 3: (i) any consolidation or merger of the Corporation with or into any
other corporation or other entity, (ii) any other corporate reorganization, or (iii) a sale, lease
or other disposition of all or substantially all of the assets of the Corporation.
4. Redemption Rights.
(a) Mandatory Redemption. Simultaneously with the consummation of an Approved Sale,
the Corporation shall redeem, subject to Section 4(c) all but not less than all of the then
outstanding shares of Preferred Stock at a redemption price per share equal to the Redemption Value
by delivering written notice of such election to the Corporation. In addition, unless a lesser
amount is otherwise approved by the holders of a majority of the outstanding Series C Preferred,
the Corporation shall redeem on or prior to July 31, 2002, 3,838,864 shares of the outstanding
Series C Preferred having a redemption price equal to its Liquidation Value plus a redemption
premium equal to 12% per annum (calculated from November 15, 2001), plus the payment of a special
fee of 2% of the Liquidation Value being redeemed, less $289,194.43.
(b) Redemption Payments. For each share of Preferred Stock which is to be redeemed
hereunder, the Corporation shall be obligated on the redemption date to pay to the holder thereof
(upon surrender by such holder at the Corporation’s principal office of the certificate
representing such share) an amount in cash equal to the Redemption Value. If the funds of the
Corporation legally available for redemption of Shares of Preferred Stock are insufficient to
redeem the total number of shares to be redeemed on such date, those funds which are legally
available shall be used to redeem the maximum possible number of shares pro rata among the holders
of Shares of Preferred Stock to be redeemed as set forth on Annex A and any remaining shares of
Preferred Stock shall be deemed automatically to have been surrendered to the Corporation without
further consideration.
(c) Notice of Redemption. The Corporation shall mail written notice of each
redemption of Shares of Preferred Stock to each record holder thereof not more than 60 nor less
than 10 days prior to the date fixed for redemption thereof.
(f) Determination of the Number of Shares to be Redeemed. In partial redemptions
hereunder, Shares of Preferred Stock shall be redeemed from the holders thereof ratably in
proportion to the amounts they would have received in a full redemption.
5. Certain Definitions.
“Approved Sale” means a sale of the Corporation (either through a sale of equity,
merger, consolidation, or sale of all or substantially all of the assets of the Corporation) which
has been approved by the Board of Directors of the Corporation and at least two managers of Global
Investment I, LLC, a Delaware limited liability company.
“Redemption Value” means an amount determined in accordance with Annex A.
“SubDebt Documents” means any agreement with the Corporation for borrowed money
outstanding as of May 9, 2002, other than (i) any agreement to which all other
indebtedness of the Corporation is subordinated (which as May 9, 2002 is the Credit and Security
Agreement with Xxxxx Fargo Business Credit, Inc.) and (ii) any credit agreement with Global
Investment I, LLC, in each case as the same may be amended, modified or restated from time to time.
“Subsidiary” means any corporation of which the shares of outstanding capital stock
possessing the voting power (under ordinary circumstances) in electing the board of directors are,
at the time as of which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.
6. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions of the Series C
Preferred or Series D Preferred shall be binding or effective without the prior affirmative vote or
written consent of the holders of two-thirds of the outstanding Series C Preferred and Series D
Preferred voting as a separate class, and no change in such terms may be accomplished by merger or
consolidation of the Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of two-thirds of the outstanding Series C
Preferred and Series D Preferred voting as a separate class. Any amendment, modification or waiver
of any of the terms or provisions of any Series of Preferred Stock approved in the manner described
in this Section 6, whether prospective or retroactively effective, shall be binding upon all
holders of such Series of Preferred Stock.
7. Registration of Transfer.
The Corporation shall keep at its principal office a register for the registration of the
Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place,
the Corporation shall, at the request of the record holder of such certificate, execute and deliver
(at the Corporation’s expense) a new certificate or certificates in exchange therefore representing
in the aggregate the number of shares represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of shares as is
requested by the holder of the surrendered certificate and shall be substantially identical in form
to the surrendered certificate.
8. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Preferred Stock, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation
(provided that if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate
a new certificate of like kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed
or mutilated certificate.
9. Notices.
Any notice required by the provisions of this Article V shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All notices to stockholders shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
10. Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Preferred Stock, excluding any tax or other charge imposed in connection
with any transfer involved in the issue and delivery of shares of Common Stock in a name other than
that in which the shares of Preferred Stock so converted were registered.
11. No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation.
12. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued.
C. Transfer Restrictions: The Corporation shall have the right, by appropriate action, to
impose restrictions upon the transfer of any shares of its capital stock, or any interest therein,
from time to time issued, provided that notice of such restrictions shall be set forth upon the
face or back of the certificates representing such shares of capital stock.
D. Preemptive Rights: Except as otherwise agreed to by the Corporation, no shareholder of the
Corporation shall have any preemptive or other right to subscribe for any additional unissued or
treasury shares of capital stock or for other securities of any class, or for rights, warrants or
options to purchase capital stock, or for securities of any kind convertible into or exchangeable
for capital stock.
* * * * *
IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed
these Articles of Amendment pursuant to Section 0-000-000 of the Colorado Business Corporation Act
as of the 9th day of May 2002.
/s/ Xxxxxx Xxxxx
|
||||
| Xxxxxx Xxxxx President |
ANNEX A
Redemption Value
After repayment of any indebtedness for borrowed money (other than any of the indebtedness
incurred pursuant to the SubDebt Documents), the proceeds of any Approved Sale (“Net
Funds”) shall be applied as follows:
(a) Management. Prior to any of the following payments, the Corporation’s management
(“Management”) will receive a percentage of the Net Funds determined in accordance with
Schedule A hereto, and shall be distributed to management in the manner determined by the
compensation committee of the Board of Directors of the Corporation. Such distributions may be in
the form of bonuses or equity instruments, or any combination thereof, at the discretion of the
compensation committee.
(b) Tier 1. After the payment to Management described in clause (a) has been paid in
full, an amount equal to three times the difference between 6,838,864 and the amount of Series C
Preferred Stock redeemed prior to such payment (but in no event less than $9 million) of Net Funds
shall be paid to holders of Series C Preferred pro rata based on the outstanding number of shares
of Series C Preferred.
(c) Tier 2. After Tier 1 has been paid in full, payments shall be made in the
following proportions until the principal amount owing under SubDebt Documents:
(i) 51.3% to the payment of the outstanding debt set forth on Schedule B, pro rata, based on
the outstanding amount of principal under the SubDebt Documents set forth on Schedule B;
(ii) 26.7% to the holders of Series C Preferred pro rata based on the outstanding number of
shares of Series C Preferred; and
(iii) 22% to the holders of Series D Preferred pro rata based on the outstanding shares of
Series D Preferred.
(d) Tier 3. After Tier 2 has been paid in full, payments shall be made in the
following proportions until the holders of Series C Preferred of the Corporation have
received an aggregate of $14,746,960.40 (including the payments to them under Tier 2):
(i) 28.2% to holders of Series C Preferred pro rata based on the outstanding number of shares
of Series C Preferred; and
(ii) 71.8% to the holders of Series D Preferred pro rata based on the outstanding shares of
Series D Preferred.
(e) Tier 4. After Tier 3 has been paid in full, payments shall be made in the
following proportions until the persons and entities set forth on Schedule C (the
“Original Holders”) have
received an aggregate of $22,221,038.34 (including the payments to them under Tiers 2 and 3):
(i) 30% to the holders of Series C Preferred pro rata based on the outstanding shares of
Series C Preferred; and
(ii) 70% to the holders of Series D Preferred pro rata based on the outstanding shares of
Series D Preferred.
(f) Tier 5. After Tier 4 has been paid in full, payments shall be made in the
following proportions until the entities set forth on Schedule D (the “Subordinated
Lenders”) have received 100% of the accrued and unpaid interest set forth on Schedule D (the
“Accrued Interest Amounts”):
(i) 32% to the holders of Series C Preferred pro rata based on the outstanding shares of
Series C Preferred;
(ii) 33.3% to the holders of Series D Preferred pro rata based on the outstanding shares of
Series D Preferred; and
(iii) 34.7% to the Subordinated Lenders, pro rata, based on the Accrued Interest Amounts.
(g) Tier 6. After Tier 5 has been paid in full, the remaining funds shall be
distributed in the following proportions:
(i) 32% to the holders of Series C Preferred pro rata based on the outstanding shares of
Series C Preferred;
(ii) 51.2% to the holders of Series D Preferred pro rata based on the outstanding shares of
Series D Preferred;
(iii) 10.0% to the holders of the Corporation’s common stock; and
(iv) 6.8% to the Subordinated Lenders, pro rata, based on the outstanding amount of principal
under the SubDebt Documents set forth on Schedule B.
| Mail to: Secretary of State | For office use only 006 | |||
| Corporations Section | ||||
Please include a typed
|
0000 Xxxxxxxx, Xxxxx 000 | |||
self-addressed envelope MUST BE TYPED |
Xxxxxx, XX 00000 (000)000-0000 Fax (000)000-0000 |
|||
FILING FEE: $5.00 |
||||
MUST SUBMIT TWO COPIES |
CERTIFICATE OF CORRECTION
Pursuant to the Colorado Business Corporation Act, the undersigned hereby executes the following
certificate of correction:
FIRST:
|
The exact name of the corporation is Global Employment solutions, inc. | |
| organized under the laws of Colorado | ||
SECOND:
|
Description of the documents being corrected (i.e. Articles of Incorporation, Amendment, Merger or other) or an attached copy of the document: | |
| Articles of Amendment to Articles of Incorporation | ||
THIRD:
|
Date document was filed May 15, 2002. | |
FOURTH:
|
Statement of incorrect information: | |
| Schedules A, B, C and D to Annex A to the Articles of Amendment to Articles of Incorporation | ||
FIFTH:
|
Statement of corrected information | |
| See attached corrected Schedules A, B, C and D to Annex A to the Articles of Amendment to Articles of Incorporation. |
| Signature | [ILLEGIBLE]
|
|||||
| Title President | ||||||
Schedule A — Management Share of Net Proceeds
| Management | ||||||||||||
| If Net Funds are | But Less Than | Allocation | ||||||||||
| Greater Than: | or Equal To | of Proceeds | ||||||||||
Xxxxx 0 |
$ | 0 | $ | 48,192,226 | 10.00 | % | ||||||
Xxxxx 0 |
$ | 48,192,226 | $ | 61,405,470 | 15.00 | % | ||||||
Xxxxx 0 |
$ | 61,405,470 | $ | 82,429,483 | 20.00 | % | ||||||
Xxxxx 0 |
$ | 82,429,483 | n/a | 25.00 | % | |||||||
Schedules B and D — Subordinated Lender Allocation of Principal and Interest
| Class | Total | |||||||||||||||
| Sub Debt | Total | Allocation | Allocation | |||||||||||||
| Principal | Allocation | of Accrued | of Accrued | |||||||||||||
| Invested | of Principal | Interest | Interest | |||||||||||||
Parties to the Note Purchase Agreement, Dated March 13, 1998, as
amended: |
||||||||||||||||
Seacoast Capital |
$ | 4,300,000.00 | 26.96 | % | $ | 576,015.45 | 29.76 | % | ||||||||
Pacific Mezzanine |
2,866,000.00 | 17.97 | % | 383,920.99 | 19.83 | % | ||||||||||
Stratford Capital |
4,050,000.00 | 25.39 | % | 542,526.18 | 28.03 | % | ||||||||||
Rocky Mountain Capital |
2,750,000.00 | 17.24 | % | 368,381.97 | 19.03 | % | ||||||||||
Subtotal |
$ | 13,966,000.00 | 87.56 | % | $ | 1,870,844.59 | 96.66 | % | ||||||||
Party to the Promissory Note dated |
||||||||||||||||
November 15, 2001: |
||||||||||||||||
KRG Colorado, LLC |
1,500,000.00 | 9.40 | % | 0.00 | 0.00 | % | ||||||||||
Parties to the Subordinated Promissory |
||||||||||||||||
Note Agreement, Dated July 29, 1988: |
||||||||||||||||
Xxxxxx Xxxxxxx |
457,965.06 | 2.87 | % | 61,259.06 | 3.16 | % | ||||||||||
Xxxx Xxxxxxxxx |
25,944.36 | 0.16 | % | 3,470.41 | 0.18 | % | ||||||||||
Subtotal |
$ | 483,909.42 | 3.03 | % | $ | 64,729.47 | 3.34 | % | ||||||||
Total |
$ | 15,949,909.42 | 100.00 | % | $ | 1,935,574.06 | 100.00 | % | ||||||||
Total Principal and Accrued Interest |
$ | 17,885,483.48 | ||||||||||||||
Schedule C — Original Holders
| Total | ||||||||||||
| Shares | Old Equity | Allocation | ||||||||||
| Outstanding | Invested | of Proceeds | ||||||||||
Seacoast Capital Partners |
210,664 | $ | 1,299,998.04 | 5.85 | % | |||||||
Pacific Mezzanine Fund |
68,648 | 399,999.62 | 1.80 | % | ||||||||
Bayview Investors, Ltd. |
56,819 | 300,004.32 | 1.35 | % | ||||||||
Stratford Equity Partners, L.P. |
538,461 | 3,499,996.50 | 15.75 | % | ||||||||
Stratford
Capital Partners, L.P. |
76,923 | 499,999.50 | 2.25 | % | ||||||||
Argentum
Capital Partners II, L.P. |
136,575 | 887,737.50 | 4.00 | % | ||||||||
Infrastructure & Environmental Private Equity Fund III, L.P. |
218,519 | 1,420,373.50 | 6.39 | % | ||||||||
Environmental & Information Technology Private Equity Fund
III |
54,629 | 355,088.50 | 1.60 | % | ||||||||
The
Productivity Fund III, L.P. |
102,431 | 665,801.50 | 3.00 | % | ||||||||
Rocky Mountain Mezzanine Fund II, L.P. |
115,385 | 750,002.50 | 3.38 | % | ||||||||
Xxxxx Xxxxxxxxxx |
102,858 | 543,090.24 | 2.44 | % | ||||||||
Xxx Xxxxxxxx |
77,142 | 407,309.76 | 1.83 | % | ||||||||
Xxxx Xxxxxxxx |
20,000 | 105,600.00 | 0.48 | % | ||||||||
Xxxxxxx X. Xxxxxxxxxx |
59,230 | 384,995.00 | 1.73 | % | ||||||||
Xxxxxxx X. Xxxx, Xx. |
48,462 | 315,003.00 | 1.42 | % | ||||||||
Xxxxxx X. Xxxxxxx |
819,854 | 2,357,229.00 | 10.61 | % | ||||||||
Xxxxxx X. Xxxxxxxxx |
46,446 | 133,542.00 | 0.60 | % | ||||||||
Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx |
1,486 | 8,503.66 | 0.04 | % | ||||||||
Xxxxxx X. Xxxxxxx |
3,788 | 22,311.32 | 0.10 | % | ||||||||
Xxxx X. Xxxxxx |
4,000 | 23,560.00 | 0.11 | % | ||||||||
Xxxxx X. Xxxxxxxxx |
2,000 | 11,780.00 | 0.05 | % | ||||||||
Xxxxxx X. Xxxxxx |
8,581 | 49,999.80 | 0.23 | % | ||||||||
Xxxxxxx Xxxxxxx |
7,500 | 44,175.00 | 0.20 | % | ||||||||
Xxxx Xxxxxxxx |
2,000 | 10,560.00 | 0.05 | % | ||||||||
The College Fund, LLC |
4,261 | 24,230.48 | 0.11 | % | ||||||||
Xxxx X. Xxxxx, III |
1,894 | 10,000.32 | 0.05 | % | ||||||||
Xxxx Xxx Xxxxxx |
4,762 | 25,143.36 | 0.11 | % | ||||||||
AM Trust |
43,810 | 250,104.80 | 1.13 | % | ||||||||
Xxx X. Xxxxxx |
4,994 | 30,150.32 | 0.14 | % | ||||||||
Xxxxxx X. Xxxxxxx |
9,955 | 52,562.40 | 0.24 | % | ||||||||
Xxxxxx X. Xxxxxxx Self-Employed Retirement Plan |
14,250 | 75,240.00 | 0.34 | % | ||||||||
Xxxxx X. Xxxxxxx and Xxxx X. Xxxxx |
4,735 | 25,000.80 | 0.11 | % | ||||||||
Xxxxxx X. Xxxxxx Trust — Family Fund |
30,000 | 171,893.20 | 0.77 | % | ||||||||
Xxxxxx X. Xxxxxxxx |
2,000 | 11,780.00 | 0.05 | % | ||||||||
Xxxxx X. Xxxxxx |
4,000 | 23,560.00 | 0.11 | % | ||||||||
Xxxxxx X. Xxxxxxxxx |
1,000 | 5,890.00 | 0.03 | % | ||||||||
Xxxxx Xxxxxxxxx |
1,000 | 5,890.00 | 0.03 | % | ||||||||
Xxxxxx X. Xxxxxxxx |
5,000 | 29,450.00 | 0.13 | % | ||||||||
Xxxx X. Xxxxxx |
3,800 | 20,064.00 | 0.09 | % | ||||||||
Maymar Family 1997 Trust FBO Xxxx X. Xxxxxx |
1,900 | 10,032.00 | 0.05 | % | ||||||||
Maymar Family 1997 Trust FBO Xxxxxx X. Xxxxxx |
1,900 | 10,032.00 | 0.05 | % | ||||||||
Xxxxx X. Xxxxxxxx |
1,894 | 10,000.32 | 0.05 | % | ||||||||
Xxxxxx X. Xxxx, III |
1,894 | 10,000.32 | 0.05 | % | ||||||||
Xxxxx X. Xxxxx and Xxxx Xxxxxx Xxxxx |
5,000 | 31,280.00 | 0.14 | % | ||||||||
Xxxxx X. Xxxxxx SEP/XXX, Xxxx Xxxxxxxx, Custodian |
3,000 | 15,840.00 | 0.07 | % | ||||||||
Xxxxx X. Xxxxxx |
1,500 | 9,750.00 | 0.04 | % | ||||||||
Xxxxx X. Xxxxxxxxx |
1,000 | 5,280.00 | 0.02 | % | ||||||||
Xxxxxxx X. Xxxxxx, as Trustee for The Brighton Residence
Trust |
10,000 | 58,900.00 | 0.27 | % | ||||||||
Xxxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx |
14,205 | 75,002.40 | 0.34 | % | ||||||||
Home Mac Corporation |
37,879 | 200,001.12 | 0.90 | % | ||||||||
Xxxx Xxxxxxxx |
18,940 | 111,556.60 | 0.50 | % | ||||||||
Xxxxxx X. Xxxxxxxx Profit Sharing Trust |
18,940 | 111,556.60 | 0.50 | % | ||||||||
Xxxxxxxxxxx X. Xxxx |
24,385 | 128,752.80 | 0.58 | % | ||||||||
Xxx Xxxxxxxx and Xxxxxxxx Xxxxxxxx |
100,190 | 590,003.20 | 2.66 | % | ||||||||
Xxxxxxx Associates |
56,818 | 299,999.04 | 1.35 | % | ||||||||
Schedule C — Original Holders
| Total | ||||||||||||
| Shares | Old Equity | Allocation | ||||||||||
| Outstanding | Invested | of Proceeds | ||||||||||
Skippack Partners |
9,470 | 50,001.60 | 0.23 | % | ||||||||
Xxx X. Xxxxx |
35,000 | 184,800.00 | 0.83 | % | ||||||||
Jacob Bank |
2,841 | 15,000.48 | 0.07 | % | ||||||||
Xxxxxxxx Bank |
1,000 | 6,500.00 | 0.03 | % | ||||||||
Xxxxx Bank |
1,000 | 6,500.00 | 0.03 | % | ||||||||
Xxxxxx Xxxxx Bank |
300 | 1,950.00 | 0.01 | % | ||||||||
Xxxxxxx X. Xxxxxx |
28,000 | 164,920.00 | 0.74 | % | ||||||||
Xxxx X. Xxxxx, III and Xxxxxxx Xxx Xxxx |
4,800 | 25,344.00 | 0.11 | % | ||||||||
R&R Capital Group, Inc. |
1,600 | 10,400.00 | 0.05 | % | ||||||||
Xxxxxxx X. Xxxxxxx and Xxxxxxxxx X. Xxxxxxx |
10,000 | 52,800.00 | 0.24 | % | ||||||||
Xxxxxxx X. Xxxxxxxx |
1,894 | 10,000.32 | 0.05 | % | ||||||||
Xxxxxxx X. Xxxx |
4,500 | 23,760.00 | 0.11 | % | ||||||||
First American Trust Company, as Trustee for Xxxxx
& Xxxxxx, FBO |
1,894 | 10,000.32 | 0.05 | % | ||||||||
Xxxx X. Xxxxxxx |
1,895 | 10,005.60 | 0.05 | % | ||||||||
Xxxxx X. Xxxxxxx |
14,205 | 75,002.40 | 0.34 | % | ||||||||
Xxxx X. Xxxx |
9,470 | 55,778.30 | 0.25 | % | ||||||||
Xxxx X. Xxxx |
3,788 | 22,311.32 | 0.10 | % | ||||||||
Xxxxxx X. Xxxxx |
00 | 357.50 | 0.00 | % | ||||||||
Xxxx X. Xxxx |
23,674 | 124,998.72 | 0.56 | % | ||||||||
Xxxxxx X. Xxxx |
14,205 | 75,002.40 | 0.34 | % | ||||||||
Xxxx X. Xxxx Trust |
576 | 3,041.28 | 0.01 | % | ||||||||
Xxxxxx X. Xxxx Trust |
576 | 3,041.28 | 0.01 | % | ||||||||
MBKChildrens Trust |
190 | 1,003.20 | 0.00 | % | ||||||||
Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx, Tenants in
Common |
39,220 | 207,081.60 | 0.93 | % | ||||||||
Capital Resources Growth, Inc. |
22,451 | 121,873.10 | 0.55 | % | ||||||||
Xxxxxxx X. Xxxxxxxxx and Xxxxx X. Xxxxxxxx |
10,000 | 52,800.00 | 0.24 | % | ||||||||
Xxxxx X. Xxxxxxxx |
7,500 | 39,600.00 | 0.18 | % | ||||||||
Xxxxx X.
Xxxxxxxx, Custodian for Xxxxxx X. Xxxxxxxxx |
1,000 | 5,280.00 | 0.02 | % | ||||||||
Xxxxx X. Xxxxxxxx, Custodian for Xxxxxx X. Xxxxxxxxx |
1,000 | 5,280.00 | 0.02 | % | ||||||||
Xxxxxx X. Xxxxxxx |
1,769 | 11,498.50 | 0.05 | % | ||||||||
Xxxx Xxxxxxxxx |
70,180 | 491,260.00 | 2.21 | % | ||||||||
Xxxxx Xxxxxxx |
44,914 | 314,398.00 | 1.41 | % | ||||||||
Xxxxx Xxxxxxxxx |
5,614 | 39,298.00 | 0.18 | % | ||||||||
Xxxx Xxxxx |
5,614 | 39,298.00 | 0.18 | % | ||||||||
Xxxxx Xxxxxxxx |
4,211 | 29,473.50 | 0.13 | % | ||||||||
Xxxx and Xxxxx Xxxxx |
4,211 | 29,473.50 | 0.13 | % | ||||||||
Xxxxx Xxxxxxxxx |
2,807 | 19,649.00 | 0.09 | % | ||||||||
Xxxxx Xxxxxx |
2,807 | 19,649.00 | 0.09 | % | ||||||||
Xxxxxxx Xxxxxxx |
2,500 | 17,500.00 | 0.08 | % | ||||||||
Xxxxxx X. Xxxxxxx |
107,143 | 750,001.00 | 3.38 | % | ||||||||
Xxxxxx X. Xxxxxxx |
35,714 | 249,998.00 | 1.13 | % | ||||||||
Economics “Held” for Main Line Option Holders |
100,000 | 700,000.00 | 3.15 | % | ||||||||
Xxx Xxxxxxxx |
19,886 | 104,998.08 | 0.47 | % | ||||||||
Xxxxxx Xxxxxxxxxx |
35,415 | 283,318.00 | 1.27 | % | ||||||||
Mithra Bindhu |
82,637 | 661,096.00 | 2.98 | % | ||||||||
Xxxxxx Xxxxx |
20,011 | 160,090.00 | 0.72 | % | ||||||||
Total |
4,014,843 | $ | 22,221,038.34 | 100.00 | % | |||||||
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
Pursuant to Sections 0-000-000 and 0-000-000 of the
Colorado Business Corporation Act
Colorado Business Corporation Act
GLOBAL EMPLOYMENT SOLUTIONS, INC., a corporation organized under the laws of the State of
Colorado (the “Corporation”), does hereby certify:
1. The name of the Corporation is Global Employment Solutions, Inc.
2. The Board of Directors on February 3, 2005, pursuant to authority granted by the Articles
of Incorporation and Sections 0-000-000 and 106 of the Colorado Business Corporation Act, duly
adopted the following amendments and restatements in their entirety of Section V.B.1 and Article
XIII of the Corporation’s Articles of Incorporation regarding the dividend rights of the
Corporation’s Preferred Stock and the distribution of the Corporation’s assets, respectively.
3. These amendments and restatements of Section V.B.1 and Article XIII of the Corporation’s
Articles of Incorporation were duly approved and adopted at a meeting of the shareholders of the
Corporation on March 14, 2005, and the number of votes cast for them at such meeting by each of the
voting groups of shareholders entitled to vote separately thereon was sufficient for approval by
such voting group.
Article V
B. Preferred Stock:
1. Dividend Rights.
No dividends shall be paid on the Common Stock for so long as any class of Preferred Stock is
outstanding, unless such dividends are paid in accordance with the same sequence of priorities set
forth in Sections (a) through (g) of Annex A (Redemption Value) to the Corporation’s Articles of
Incorporation but disregarding the introductory paragraph to such Annex A requiring repayment of
certain of the Corporation’s indebtedness.
* * * * *
Article XIII
In addition to the other powers now or hereafter conferred upon the Board of Directors by
these Articles of Incorporation, the Bylaws of the Corporation, or by the laws of the State of
Colorado, if the Board of Directors determines from time to time that it has sufficient assets,
either in cash or in kind, of the Corporation available for distribution, it may, subject to the
limitations contained in the Colorado Business Corporations Act, distribute such assets, in partial
liquidation, in accordance with the same sequence of priorities set forth in Sections (a) through
(g) of Annex A (Redemption Value) to these Articles of Incorporation but disregarding the
introductory paragraph to such Annex A requiring repayment of certain of the Corporation’s
indebtedness. In the event of any such distributions, the amounts payable to any person,
including a shareholder of the Corporation, in connection with an Approved Sale pursuant to Section
V.B.4 of these Articles of Incorporation shall be reduced by the aggregate amount of the
distributions previously received by such person.
* * * * *
EXHIBIT B
BYLAWS
(See Attached)
BY-LAWS
GLOBAL PERSONNEL SERVICES, INC.
A Colorado Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in the State
of Colorado shall be located in the County of Denver at 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxx 00000. The name of the corporation’s registered agent at such address shall be Xxxxx X.
Xxxxxx. The registered office and/or registered agent of the corporation may be changed from time
to time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such other
places, both within and without the State of Colorado, as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall
be held each year for the purpose of electing directors and conducting such other proper business
as may come before the meeting. The date, time and place of the annual meeting may be determined
by resolution of the board of directors or by the president of the corporation.
Section 2. Special Meetings. Special meetings of stockholders may be called for any
purpose (including, without limitation, the filling of board vacancies and newly created
directorships), and may be held at such time and place, within or without the State of Colorado,
as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such
meetings may be called at any time by any member of the board of directors or the president and
shall be called by the president upon the written request of holders of shares entitled to cast not
less than thirty percent (30%) of the total voting power of the corporation’s outstanding voting
stock.
Section 3. Place of Meetings. The board of directors may designate any place, either
within or without the State of Colorado, as the place of meeting for any annual meeting or for any
special meeting called by the board of directors. If no designation is made, or if a special
meeting is otherwise called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take action at
a meeting, written or printed notice stating the place, date, time and, in the case of special
meetings, the purpose or purposes of such meeting, shall be given to each stockholder entitled to
vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the direction of the board
of directors, the president or the secretary, and if mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder
at his, her or its address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except when the person
attends for the express purpose of objecting at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock ledger of the
corporation shall make, at least 10 days before every meeting of the stockholders, a complete list
of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting or, if not so specified, at the corporation’s principal office. The
list shall also be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. Except as otherwise provided by applicable law or by the Articles
of Incorporation, a majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less
than a majority of the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time in accordance with Section 7 of this Article
until a quorum shall be present or represented.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time and
place, notice need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned meeting, the
corporation may transact any business which might have been transacted at the original meeting. If
the adjournment is for more than thirty days, or if after the adjournment a new record date is
fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and entitled to vote on
the subject
- 2 -
matter shall be the act of the stockholders, unless the question is one upon which by
express provisions of an applicable law or of the Articles of Incorporation a different vote is
required, in which case such express provision shall govern and control the decision of such
question. Where a separate vote by class is required, the affirmative vote of the majority of
shares of such class present in person or represented by proxy at the meeting shall be the act of
such class.
Section 9. Voting Rights. Except as otherwise provided by the Colorado Business
Corporation Act or by the Articles of Incorporation and subject to Section 3 of Article VI hereof,
every stockholder shall at every meeting of the stockholders be entitled to one vote in person or
by proxy for each share of common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him, her or it by proxy. Every proxy must be signed by the
stockholder granting the proxy or by his, her or its attorney-in-fact. No proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long
as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled is an interest in
the stock itself or an interest in the corporation generally.
Section 11. Action by Written Consent. Unless otherwise provided in the Articles of
Incorporation or these by-laws, any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be executed by all
stockholders entitled to vote thereon and delivered to the corporation by delivery to its
registered office in the state of Colorado, or the corporation’s principal place of business, or an
officer or agent of the corporation having custody of the book or books in which proceedings of
meetings of the stockholders are recorded. Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by the stockholders
at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall be
managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors which shall
constitute the full board of directors shall be established from time to time by resolution of the
board. The members of the board of directors shall be elected at each annual meeting of
stockholders by a plurality of the votes cast by the holders of shares present in person or
represented
- 3 -
by proxy at the meeting and entitled to vote in the election of directors. Each
director so elected shall hold office until a successor is duly elected and qualified or until his
or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of directors
may be removed at any time with or without cause by the holders of a majority of the shares then
entitled to vote at an election of directors. Whenever the holders of any class or series of stock
are entitled to elect one or more directors by the provisions of the corporation’s Articles of
Incorporation, the provisions of this section shall apply, in respect to the removal of a director
or directors so elected, to the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole. Any director may resign at any
time upon written notice to the corporation.
Section 4. Vacancies. Except as otherwise provided by the Articles of Incorporation,
vacancies and newly created directorships resulting from any increase in the authorized number of
directors may be filled by a majority vote of the directors then in office. Each director so
chosen shall hold office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board of
directors shall be held without other notice than this by-law immediately after, and at the same
place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the annual
meeting, of the board of directors may be held without notice at such time and at such place as
shall from time to time be determined by resolution of the board. Special meetings of the board of
directors may be called by or at the request of the chairman of the board or the president on at
least 24 hours notice to each director, either personally, by telephone, by mail or by telegraph;
in like manner and on like notice the president must call a special meeting on the written request
of at least a majority of the directors.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of
directors shall constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of the board of
directors. If a quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to consist of one or
more of the directors of the corporation, which to the extent provided in such resolution or these
by-laws shall have and may exercise the powers of the board of directors in the management and
affairs of the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. Such committee or committees shall have
such name or
- 4 -
names as may be determined from time to time by resolution adopted by the board of
directors. Each committee shall keep regular minutes of its meetings and report the same to the
board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors may fix its own
rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise
be provided by a resolution of the board of directors designating such committee. Unless otherwise
provided in such a resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that member’s alternate,
if alternates are designated by the board of directors as provided in Section 8 of this Article
III, of such committee is or are absent or disqualified, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act at the meeting in
place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or any
committee thereof may participate in and act at any meeting of such board or committee through the
use of a conference telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of
directors or any committee thereof who is present at a meeting shall be conclusively presumed to
have waived notice of such meeting except when such member attends for the express purpose of
objecting at the beginning of the meeting to the transaction of any business because the meeting is
not lawfully called or convened. Such member shall be conclusively presumed to have assented to
any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless
his or her written dissent to such action shall be filed with the person acting as the secretary of
the meeting before the adjournment thereof or shall be forwarded by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the Articles
of Incorporation, any action required or permitted to be taken at any meeting of the board of
directors, or of any committee thereof, may be taken without a meeting if all members of the board
or committee, as the case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
- 5 -
ARTICLE IV
OFFICERS
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the board of
directors and shall consist of a chairman, if any is elected, a president, one or more vice
presidents, a secretary, a treasurer, and such other officers and assistant officers as may be
deemed necessary or desirable by the board of directors. Any number of offices may be held by the
same person, except that no person may simultaneously hold the office of president and secretary.
In its discretion, the board of directors may choose not to fill any office for any period as it
may deem advisable.
Section 2. Election and Term of Office. The officers of the corporation shall be
elected annually by the board of directors at its first meeting held after each annual meeting of
stockholders or as soon as practicable thereafter. The president shall appoint other officers to
serve for such terms as he or she deems desirable. Vacancies may be filled or new offices created
and filled at any meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors may be
removed by the board of directors whenever in its judgment the best interests of the corporation
would be served thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board of directors for
the unexpired portion of the term by resolution of the board of directors.
Section 5. Compensation. Compensation of all officers shall be fixed by the board of
directors, and no officer shall be prevented from receiving such compensation by virtue of his or
her also being a director of the corporation.
Section 6. The Chairman of the Board. The chairman of the board, if one shall have
been elected, shall be a member of the board, an officer of the corporation, and, if present, shall
preside at each meeting of the board of directors or shareholders. The chairman of the board
shall, in the absence or disability of the president, act with all of the powers and be subject to
all the restrictions of the president. He shall advise the president, and in the president’s
absence, other officers of the corporation, and shall perform such other duties as may from time to
time be assigned to him by the board of directors.
Section 7. The President. The president shall be the chief executive officer of the
corporation. In the absence of the chairman of the board or if a chairman of the board shall have
not been elected, the president shall preside at all meetings of the stockholders and board of
directors at which he or she is present. Subject to the powers of the board of directors, the
president shall have general charge of the business, affairs and property of the corporation, and
control over its officers, agents and employees; and shall see that all orders and resolutions of
the board of directors are carried into effect. The president shall have such other powers and
perform such other duties as may be prescribed by the board of directors or as may be provided in
these by-laws.
Section 8. Vice-Presidents. The vice-president, if any, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors shall, in the
absence or
disability of the president, act with all of the powers and be subject to all the restrictions of
the president. The
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vice-presidents shall also perform such other duties and have such other powers
as the board of directors, the president or these by-laws may from time to time prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary shall attend all
meetings of the board of directors, all meetings of the committees thereof and all meetings of the
stockholders and record all the proceedings of the meetings in a book or books to be kept for that
purpose. Under the president’s supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers and perform such
duties as the board of directors, the president or these by-laws may from time to time prescribe;
and shall have custody of the corporate seal of the corporation. The secretary, or an assistant
secretary, shall have authority to affix the corporate seal to any instrument requiring it and when
so affixed, it may be attested by his or her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his or her signature. The assistant
secretary, or if there be more than one, the assistant secretaries in the order determined by the
board of directors, shall, in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary and shall perform such other duties and have such other powers
as the board of directors, the president, or secretary may from time to time prescribe.
Section 10. The Treasurer and Assistant Treasurer. The treasurer shall have the
custody of the corporate funds and securities; shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation; shall deposit all monies and other
valuable effects in the name and to the credit of the corporation as may be ordered by the board of
directors; shall cause the funds of the corporation to be disbursed when such disbursements have
been duly authorized, taking proper vouchers for such disbursements; and shall render to the
president and the board of directors, at its regular meeting or when the board of directors so
requires, an account of the corporation; shall have such powers and perform such duties as the
board of directors, the president or these by-laws may from time to time prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which shall be rendered
every six years) in such sums and with such surety or sureties as shall be satisfactory to the
board of directors for the faithful performance of the duties of the office of treasurer and for
the restoration to the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever kind in the
possession or under the control of the treasurer belonging to the corporation. The assistant
treasurer, or if there shall be more than one, the assistant treasurers in the order determined by
the board of directors, shall in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and
have such other powers as the board of directors, the president or treasurer may from time to time
prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers, assistant
officers and agents, if any, other than those whose duties are provided for in these by-laws, shall
have such authority and perform such duties as may from time to time be prescribed by resolution of
the board of directors.
Section 12. Absence or Disability of Officers. In the case of the absence or
disability of any officer of the corporation and of any person hereby authorized to act in such
officer’s place during such officer’s absence or disability, the board of directors may by
resolution delegate the
powers and duties of such officer to any other officer or to any director, or to any other person
whom it may select.
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ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that
he or she or a person of whom he or she is the legal representative, is or was a director or
officer, of the corporation or is or was serving at the request of the corporation as a director,
officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit plans, whether the
basis of such proceeding is alleged action in an official capacity as a director, officer,
employee, fiduciary or agent or in any other capacity while serving as a director, officer,
employee, fiduciary or agent, shall be indemnified and held harmless by the corporation to the
fullest extent which it is empowered to do so by the Colorado Business Corporation Act, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment) against all expense, liability and
loss (including attorneys’ fees) actually and reasonably incurred by such person in connection with
such proceeding and such indemnification shall inure to the benefit of his or her heirs, executors
and administrators; provided, however, that, except as provided in Section 2 hereof, the
corporation shall indemnify any such person seeking indemnification in connection with a proceeding
initiated by such person only if such proceeding was authorized by the board of directors of the
corporation. The right to indemnification conferred in this Article V shall be a contract right
and, subject to Sections 2 and 5 hereof, shall include the right to advancement by the corporation
of the expenses incurred in defending any such proceeding in advance of its final disposition. The
corporation may, by action of its board of directors, provide indemnification to employees and
agents of the corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of this Article V or
advance of expenses under Section 5 of this Article V shall be made promptly, and in any event
within 30 days, upon the written request of the director or officer. If a determination by the
corporation that the director or officer is entitled to indemnification pursuant to this Article V
is required, and the corporation fails to respond within sixty days to a written request for
indemnity, the corporation shall be deemed to have approved the request. If the corporation denies
a written request for indemnification or advancing of expenses, in whole or in part, or if payment
in full pursuant to such request is not made within 30 days, the right to indemnification or
advances as granted by this Article V shall be enforceable by the director or officer in any court
of competent jurisdiction. Such person’s costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in
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whole or in part, in any such
action shall also be indemnified by the corporation. It shall be a defense to any such action
(other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any, has been tendered to the corporation)
that the claimant has not met the standards of conduct which make it permissible under the Colorado
Business Corporation Act for the corporation to indemnify the claimant for the amount claimed, but
the burden of such defense shall be on the corporation. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of conduct set forth
in the Colorado Business Corporation Act, nor an actual determination by the corporation (including
its board of directors, independent legal counsel, or its stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 3. Nonexclusivity of Article V. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final disposition
conferred in this Article V shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Articles of Incorporation, by-law, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance on its own
behalf and on behalf of any person who is or was a director, officer, employee, fiduciary or agent
of the corporation or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her in any such capacity,
whether or not the corporation would have the power to indemnify such person against such liability
under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section 1 of this
Article V in defending a proceeding shall be paid by the corporation in advance of such
proceeding’s final disposition unless otherwise determined by the board of directors in the
specific case upon receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he or she is not entitled to be indemnified
by the corporation. Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the foregoing
provisions of this Article V and who are or were employees or agents of the corporation, or who are
or were serving at the request of the corporation as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized
at any time or from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a
contract right between the corporation and each director or officer who serves in any such capacity
at any time while this Article V and the relevant provisions of the Colorado Business Corporation
Act or other applicable law are in effect, and any repeal or modification of this Article V or any
such law shall not affect any rights or obligations then existing with respect to any state of
facts or proceeding then existing.
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Section 8. Merger or Consolidation. For purposes of this Article V, references to
“the corporation” shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same position under this
Article V with respect to the resulting or surviving corporation as he or she would have with
respect to such constituent corporation if its separate existence had continued.
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ARTICLE VI
CERTIFICATES FOR STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled to have
a certificate, signed by or in the name of the corporation by the chairman of the board, the
president or a vice-president and the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by such holder in the corporation. If such a certificate is
countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or
its employee or (2) by a registrar other than the corporation or its employee, the signature of any
such chairman of the board, president, vice-president, secretary, or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile signature or
signatures have been used on, any such certificate or certificates shall cease to be such officer
or officers of the corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation. All certificates for shares
shall be consecutively numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue, shall be entered on
the books of the corporation. Shares of stock of the corporation shall only be transferred on the
books of the corporation by the holder of record thereof or by such holder’s attorney duly
authorized in writing, upon surrender to the corporation of the certificate or certificates for
such shares endorsed by the appropriate person or persons, with such evidence of the authenticity
of such endorsement, transfer, authorization, and other matters as the corporation may reasonably
require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the
duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old
certificate or certificates, and record the transaction on its books. The board of directors may
appoint a bank or trust company organized under the laws of the United States or any state thereof
to act as its transfer agent or registrar, or both in connection with the transfer of any class or
series of securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates previously issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed certificate or certificates, or his or her legal representative, to give the
corporation a bond sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
corporation may determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date is adopted by the
board of directors, and which record date shall not be more than sixty nor less than ten days
before the date of such meeting. If no record date is fixed by the board of directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting of stockholders
shall be the close of business on the next day preceding the day on which notice is given, or if
notice is waived, at the
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close of business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to notice of or to vote at a meeting
of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order that the
corporation may determine the stockholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon which the resolution
fixing the record date is adopted by the board of directors. If no record date has been fixed by
the board of directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the board of directors is
required by statute, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery to its registered
office in the State of Colorado, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by the board of
directors and prior action by the board of directors is required by statute, the record date for
determining stockholders entitled to consent to corporate action in writing without a meeting shall
be at the close of business on the day on which the board of directors adopts the resolution taking
such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the corporation
may determine the stockholders entitled to receive payment of any dividend or other distribution or
allotment or any rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purposes of any other lawful action, the board
of directors may fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day on which the board
of directors adopts the resolution relating thereto.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such time, or in such
installments and at such times, as shall be determined by the board of directors. Any call made by
the board of directors for payment on subscriptions shall be uniform as to all shares of the same
class or as to all shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the amount due in the same
manner as any debt due the corporation.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation, subject
to the provisions of the Articles of Incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the Articles of
Incorporation. Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the
payment of money by or to the corporation and all notes and other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner, as shall be determined by resolution of the board of directors or
a duly authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or officers,
or any agent or agents, of the corporation to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
Section 4. Loans. The corporation may lend money to, or guarantee any obligation of,
or otherwise assist any officer or other employee of the corporation or of its subsidiary,
including any officer or employee who is a director of the corporation or its subsidiary, whenever,
in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or without interest,
and may be unsecured, or secured in such manner as the board of directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing in this section
contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
Section 6. Corporate Seal. The board of directors may provide a corporate seal which
shall be in the form of a circle and shall have inscribed thereon the name of the corporation and
the words “Corporate Seal, Colorado”. The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in any other
corporation held by the corporation shall be voted by the president, unless the board of directors
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specifically confers authority to vote with respect thereto, which authority may be general or
confined to specific instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in person or
by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose the corporation’s
stock ledger, a list of its stockholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person’s
interest as a stockholder. In every instance where an attorney or other agent shall be the person
who seeks the right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to so act on behalf of
the stockholder. The demand under oath shall be directed to the corporation at its registered
office in the State of Colorado or at its principal place of business.
Section 9. Section Headings. Section headings in these by-laws are for convenience
of reference only and shall not be given any substantive effect in limiting or otherwise construing
any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of these
by-laws is or becomes inconsistent with any provision of the Articles of Incorporation, the
Colorado Business Corporation Act or any other applicable law, the provision of these by-laws shall
not be given any effect to the extent of such inconsistency but shall otherwise be given full force
and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of
the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or
repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders
of the same powers.
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EXHIBIT C
NAMES AND TITLES OF AUTHORIZED OFFICERS
| Name | Position | Signature | ||
Xxxxxx Xxxxx
|
Chief Executive Officer and President | |||
Xxx Xxxxxxxxxx
|
Chief Financial Officer | |||
EXHIBIT D
RESOLUTIONS
(See Attached)
GLOBAL EMPLOYMENT SOLUTIONS, INC.
MINUTES OF BOARD OF DIRECTORS MEETING
February 14, 2006
A meeting of the Board of Directors (the “Board”) of Global Employment Solutions, Inc. (the
“Company”) was held on February 14, 2006 at 9:00 am, Mountain Time, via telephone.
Participating were Directors Xxxxxxx Xxxx, Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxx, Xxxx Xxxxxx, Xxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxxxxxx. Also present by invitation were
Xxx Xxxxxxxxxx, the Company’s Chief Financial Officer, and Xxxx Xxxxxxx of Xxxxxxxxxx Xxxxx &
Xxxxxx, the Company’s legal counsel. Directors Xxxxxx Xxxxxxx and Xxxx Xxxxx did not participate
in the meeting.
Xx. Xxxxxxxxx called the meeting to order.
The first order of business was an update of the proposed recapitalization given by Xx. Xxxxxxxxx,
Xx. Xxxx, Xx. Xxxxx and Xx. Xxxxxxx. After discussion, the Board unanimously authorized the
attached resolutions associated with the Company’ recapitalization.
Xx. Xxxxx gave a brief update of the business.
Xx. Xxxxxxxxx discussed the fact that Xxx Xxxxxxxx will be terminated for an issue that came to the
attention of the management team through background checks conducted by the auditors. Xxx
Xxxxxxxxxx mentioned that Xx. Xxxxxxxx needed to be removed as a signatory on the First Trust Bank
account. Xx. Xxxx motioned that Xx. Xxxxxxxx be removed as a signatory, Xx. Xxxxxxxxxx seconded
the motion and the motion unanimously passed.
With no other business to be discussed, the meeting was then adjourned.
Corporate Resolutions Authorizing Recapitalization
| 1. | Approval of Recapitalization and Share Purchase Agreement |
WHEREAS, there has been presented to the Board for its consideration a plan of
recapitalization (the “Recapitalization”) consisting of (i) a merger with a subsidiary of a
to-be-determined public shell corporation (“PubCo”), (ii) PubCo’s issuing of up to
$30,000,000 of convertible notes, up to $12,750,000 of preferred stock and up to $4,250,000 of
common stock, each accompanied by warrants to purchase common stock, (iii) an amendment to the
Company’s current credit agreement with Xxxxx Fargo Bank, National Association, and (iv) a
shareholder dividend;
WHEREAS, there has been presented to the Board for its consideration a proposed form of Share
Purchase Agreement that implements the Recapitalization, a copy of which is attached hereto as
Attachment 1 (the “Share Purchase Agreement”), to be entered into among the
Company, PubCo, a subsidiary of PubCo and the Company’s shareholders; and
WHEREAS, the Board has determined it to be in the best interest of the Company and its
shareholders to approve the Recapitalization and the Share Purchase Agreement.
NOW, THEREFORE, BE IT RESOLVED, that the Recapitalization is authorized and
approved;
FURTHER RESOLVED, that the form, terms and provisions of the Share Purchase
Agreement are authorized and approved with such changes as the officers executing
the same deem necessary or advisable; and
FURTHER RESOLVED, that the officers of the Company are authorized and directed
to take such actions and execute and deliver on behalf of the Company such documents
or instruments as may be necessary to accomplish the foregoing resolutions.
| 2. | Authorization to Select Public Shell Corporation |
WHEREAS, pursuant to the proposed Recapitalization the Company will become a subsidiary of
PubCo;
WHEREAS, the Company has not yet identified PubCo, and the Board has determined it to be in
the best interest of the Company and its shareholders to authorize Xxxxxx Xxxxx, Xxx Xxxxxxxxxx and
KRG Capital Partners, LLP to select PubCo.
NOW, THEREFORE, BE IT RESOLVED, that Xxxxxx Xxxxx, Xxx Xxxxxxxxxx and KRG
Capital Partners, LLP are authorized and directed to select PubCo.
| 3. | Approval of Issuance of Convertible Notes and Warrants |
WHEREAS, there has been presented to the Board for its consideration a proposed form of Notes
Securities Purchase Agreement, a copy of which is attached hereto as Attachment 2 (the
“Notes Purchase Agreement”), to be entered into among the Company and several purchasers,
pursuant to which the purchasers will purchase PubCo senior secured convertibles notes, which are
convertible into PubCo common stock, in an aggregate principal amount of up to $30,000,000, and,
for no additional consideration, warrants to acquire shares of PubCo common stock; and
WHEREAS, the Board has determined that the transaction contemplated by the Notes Purchase
Agreement is in the best interest of the Company and its shareholders.
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions of the
Notes Purchase Agreement and the attached forms of Convertible Note, Warrant and
Registration Rights Agreement are authorized and approved with such changes as the
officers executing the same deem necessary or advisable; and
FURTHER RESOLVED, that the officers of the Company are authorized and directed
to take such actions and execute and deliver on behalf of the Company such documents
or instruments as may be necessary to accomplish the foregoing resolution.
| 4. | Approval of Issuance of Preferred Stock and Warrants |
WHEREAS, there has been presented to the Board for its consideration a term sheet, a copy of
which is attached hereto as Attachment 3 (the “Preferred Stock Term Sheet”),
containing the principal terms for the issuance of PubCo convertible preferred stock, convertible
into PubCo common stock in an aggregate principal amount of up to $12,750,000, and, for no
additional consideration, warrants to acquire shares of PubCo common stock, except that the escrow
provisions shall be omitted; and
WHEREAS, the Board has determined that the transaction contemplated by the Preferred Stock
Term Sheet is in the best interest of the Company and its shareholders.
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions of the
Preferred Stock Term Sheet are authorized and approved with such changes as the
officers executing the final documentation therefor deem necessary or advisable; and
FURTHER RESOLVED, that the officers of the Company are authorized and directed
to take such actions and execute and deliver on behalf of the Company such documents
or instruments as may be necessary to accomplish the foregoing resolution.
| 5. | Approval of the Issuance of Common Stock and Warrants |
WHEREAS, there has been presented to the Board for its consideration a term sheet, a copy of
which is attached hereto as Attachment 4 (the “Common Stock Term Sheet”),
containing the principal terms for the issuance of PubCo common stock in an aggregate principal
amount of up to $4,250,000, and, for no additional consideration, warrants to acquire additional
shares of PubCo common stock, except that the escrow provisions shall be omitted;
WHEREAS, the Board has determined that the transaction contemplated by the Common Stock Term
Sheet is in the best interest of the Company and its shareholders.
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions of the
Common Stock Term Sheet are authorized and approved with such changes as the
officers executing the final documentation therefor deem necessary or advisable; and
FURTHER RESOLVED, that the officers of the Company are authorized and directed
to take such actions and execute and deliver on behalf of the Company such documents
or instruments as may be necessary to accomplish the foregoing resolution.
| 6. | Approval of Amendment to Xxxxx Fargo Credit Facility |
WHEREAS, the Company is a party to a Credit and Security Agreement (the “Credit
Agreement”), by and among the Company, Excell Personnel Services Corporation, Friendly Advanced
Software Technology, Inc., Temporary Placement Service, Inc., Southeastern Staffing, Inc.,
Southeastern Personnel Management, Inc., Bay HR, Inc., Southeastern Georgia HR, Inc. and Main Line
Personnel Service, Inc. (each, a “Borrower”) and Xxxxx Fargo Bank, N.A., acting through its
Xxxxx Fargo Business Credit operating division;
WHEREAS, there has been presented to the Board for its consideration a preliminary term sheet
proposing amendments to the Credit Agreement, including an increase to the existing revolving
credit facility and an additional term loan, a copy of which is attached hereto as Attachment
5, pursuant to a Fifth Amendment to Credit and Security Agreement and Waiver of Defaults and
various other documents contemplated therein (the “Amendment to Credit Agreement”); and
WHEREAS, the Board has determined that approval of the Amendment to Credit Agreement is in the
best interest of the Company and each other Borrower and their shareholders.
NOW, THEREFORE, BE IT RESOLVED, that the Amendment to Credit Agreement, and all
documents and transactions contemplated therein, is authorized and approved, in such
form and with such changes as the officer or officers executing the same deem
advisable; and
FURTHER RESOLVED, that the respective officers of each of the Borrowers are
authorized and directed to take such actions, and execute and deliver on behalf of
each of the Borrowers the Amendment to Credit Agreement and such documents as may be
necessary to accomplish the foregoing resolution.
| 7. | Approval of Merger with MergerCo |
WHEREAS, there has been presented to the Board for its consideration a proposed Plan of
Merger, a copy of which is attached hereto as Attachment 6 (the “Plan of Merger”),
to be entered into between the Company and Global Merger Corp, a Colorado corporation
(“MergerCo”), pursuant to which MergerCo would merge with and into the Company, with the
Company being the surviving corporation; and
WHEREAS, the Board has determined that the transaction contemplated by the Plan of Merger is
in the best interest of the Company and its shareholders.
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions of the Plan
of Merger are authorized and approved with such changes as the officers executing
the final documentation therefor deem necessary or advisable; and
FURTHER RESOLVED, that the officers of the Company are authorized and directed
to take such actions and execute and deliver on behalf of the Company such documents
or instruments as may be necessary to accomplish the foregoing resolution.
| 8. | Call of Special Meeting of Shareholders |
WHEREAS, the Board deems it to be in the best interest of the Company to call a special
meeting of the shareholders (the “Special Meeting”) to vote on the Recapitalization and the
Share Purchase Agreement.
NOW, THEREFORE, BE IT RESOLVED, that the Board authorizes the President of the
Company to call the Special Meeting at any date to be determined by the President in
accordance with the Company’s Bylaws and Colorado law.
| 9. | Record Date and Notice of Special Meeting. |
WHEREAS, the Board deems it to be in the best interest of the Company to designate February
28, 2006, as the record date for the Company’s shareholders entitled to notice of and vote at the
Special Meeting.
NOW, THEREFORE, BE IT RESOLVED that February 28, 2006, is hereby designated as
the record date for shareholders entitled to notice and vote at the Special Meeting;
and
FURTHER RESOLVED, that the officers of the Company are instructed to prepare a
notice of the Special Meeting to be delivered to the shareholders in accordance with
the Company’s Bylaws and Colorado law along with a proxy statement describing the
Recapitalization.
| 10. | Recommendation that Shareholders Vote in Favor of the Recapitalization and Share Purchase Agreement |
WHEREAS, the Board deems it to be in the best interest of the Company for the shareholders to
vote in favor of the Recapitalization and the Share Purchase Agreement.
NOW, THEREFORE, BE IT RESOLVED that the Board recommends to the Company’s
shareholders to vote in favor of the Recapitalization and the Share Purchase
Agreement.
| 11. | Past Authority |
RESOLVED, that all actions taken by the officers of the Company prior to the
date of these resolutions which are within the authority conferred hereby are
ratified and approved.
I, Xxxxxxxxxxx Xxxx, the undersigned Secretary of Global Employment Solutions, Inc., a
Colorado corporation, hereby certify that the foregoing is a full, true and correct copy of the
resolutions duly passed by the Board of Directors thereof at a meeting of said Board held on the
day and at the place therein specified, and that said resolution has never been revoked, rescinded,
or set aside, and is now in full force and effect.
Attachment 1
Share Purchase Agreement
[See Exhibit 10.1 to this Form 8-K]
Attachment 2
Notes Purchase Agreement
[See Exhibit 10.2 to this Form 8-K]
Attachment 3
Preferred Stock Term Sheet
(see attached)
December 27, 2005
CONFIDENTIAL
Term Sheet for Global Employment Solutions (the “Company”)
Term Sheet for Global Employment Solutions (the “Company”)
Transaction:
|
The financing contemplated by this Term Sheet (the “Financing”) is being effected in expectation of a reverse-merger “going-public” transaction (the “Transaction”) by the Company. It is contemplated that the Financing will be documented and that the proceeds of the Financing (the “Escrowed Amount”) will be deposited into escrow on or before January 15, 2006 (the actual date on which funds are deposited into escrow being hereinafter referred to as the “Escrow Deposit Date”). The Escrowed Amount shall not be released to the Company until the fulfillment of each of the following conditions (the “Release Conditions”): | |
| (a) the closing of a purchase of not less than 90% of the Company’s equity in a manner and for consideration described more fully in Exhibit A hereto (the “Share Purchase”) by a public “shell” company whose common stock is quoted on a national securities exchange or on the OTC Bulletin Board (or a wholly-owned subsidiary of such entity)(such entity being hereinafter referred to as “PubCo” or the “Issuer”), which entity shall be incorporated in, and in good standing in, the State of Delaware and shall otherwise be satisfactory to RG (as defined herein) in its sole discretion; | ||
| (b) the merger (the “Merger”) of the Company with and into PubCo (or a wholly-owned subsidiary of PubCo) immediately following the Share Purchase, pursuant to which (i) the remaining equity securities of the Company not acquired by PubCo in the Share Purchase will be converted into the same consideration received by those equity security holders of the Company who participated in the Share Purchase and (ii) the shareholders of the Company immediately prior to the Share Purchase and the Merger will own, on a fully-diluted basis following completion of the Share Purchase and the Merger, not less than 97% of the common stock of such surviving entity (or the parent corporation of such surviving entity if the surviving entity is not PubCo); | ||
| (c) delivery to the Investors (as defined herein) of audited financial statements of PubCo prepared in accordance with U.S. GAAP for the periods ended December 28, 2003, January 2, 2005 and January 1, 2006, audited by CBIZ/Xxxxx Xxxxxxx & XxXxxx P.C. or another auditing firm of regionally recognized standing acceptable to RG in its sole discretion, which financial statements (i) shall contain an unqualified opinion of such auditor, (ii) shall reflect pro forma capitalization substantially identical to that set forth on Exhibit B hereto (taking into account the Share Purchase, the Merger and the special dividends and other distributions of proceeds from the Financing and the Concurrent Offerings (as defined herein) expected to be made to the former security holders and current management of the Company in the amounts set forth in Exhibit B hereto (collectively, the “Dividends”)), (iii) fulfill the financial statement requirements for inclusion in both the Current Report on Form 8-K and Registration Statement on Form S-I that PubCo will be obligated to file following the consummation of the Share Purchase, (iv) shall be materially in conformity with the financial statements of the Company (audited by Xxxxx Xxxxxxxx) for the periods ended December 28, 2003 and January 2, 2005 previously provided to the Investors (other than any non-material change in the balance of the accrued liability related to the worker’s compensation insurance program in place prior to August 2002, as more fully explained in Notes A and N to the 2004 annual report (a “Worker’s Compensation Adjustment”)), and (v) shall reflect EDITDA (after adjustment for (v) a Worker’s Compensation Adjustment, (w) the annual management fee to KRG Capital Partners, LLC, (x) charges related to employee terminations in the first quarter of 2005, (y) fees and expenses related to the Share Purchase and the transactions contemplated hereby and (z) accounting treatment of the Share Purchase and the transactions contemplated hereby with respect to outstanding management equity plan shares)) for the period ended January 1, 2006 of at least $10,500,000; |
| (d) the extension and modification of the Company’s credit facility with Xxxxx Fargo Business Credit to provide for a credit facility of not less than $15,000,000, on commercially reasonable terms acceptable to RG in its sole discretion; | ||
| (e) each member of management of the Company having entered into non-competition and non-solicitation agreements with the Company and PubCo in form and substance satisfactory to RG in its sole discretion, together with agreements between each such member of management and PubCo providing that PubCo shall not grant demand or piggyback registration rights to any such individual, or otherwise agree to register any securities held by any such individual for resale, for a period of two years from the Closing Date (as defined herein); | ||
| (f) there having not developed, occurred, or come into effect or existence after the Escrow Deposit Date, any change in, or any development involving a prospective change in or affecting, the position of the Company or PubCo, financial or otherwise, that has had, or would be expected to have, a material adverse effect on the Company’s or PubCo’s general affairs, management, financial condition, shareholders’ equity, results of operations or prospects as determined by RG in its sole discretion; and | ||
| (g) there having not developed, occurred or come into effect or existence (i) any suspension or material limitation in trading in securities generally or of PubCo’s shares on the principal stock exchange on which PubCo’s shares are traded (or, if applicable, the trading of Pubco’s shares on the OTC Bulletin Board), (ii) a moratorium on commercial banking activities by either federal or New York State authorities, or (iii) any event, action, state, condition or major financial occurrence of national or international consequence, including any outbreak or escalation of hostilities, act of terrorism, war, national or international emergency, calamity or crisis or like event, or any governmental action, law, regulation, inquiry or other occurrence of any nature which, in the case of any event specified in this clause (iii), in the sole opinion of RG, materially adversely affects or may materially affect the financial markets or the business, operations, affairs or prospects of the Company or PubCo. | ||
Escrow Release:
|
The date on which all of the Release Conditions and all of the other conditions precedent to the Investors’ obligations to close set forth herein have been satisfied, the Escrowed Amount has been released to PubCo, and the Preferred and Warrants (each as defined below) shall have been issued and delivered to the Investors shall be hereinafter referred to as the “Closing Date”. Until the Closing Date, or the return of the Escrowed Amount to the Investors as contemplated below, the Investors shall be paid a monthly facility commitment fee (the “Commitment Fee”), regardless of whether or not the Transaction is consummated. The Commitment Fee shall be calculated at an annual rate equal to 8% of the Escrowed Amount, increasing to an annual rate of 12% starting on March 1, 2006, payable monthly in arrears by the fifth business day of each subsequent month and prorated for the actual number of days during the Escrow Period (as defined below). In the event that the Release Conditions are not fulfilled prior to March 31, 2006, the Investors shall have the right to call for the return of the Escrowed Amount to the Investors at any time beginning on or after April 1, 2006, whereupon the obligations of the Investors under the documents contemplated hereby shall terminate and be null and void, except that the Company’s obligation with respect to the payment of the Commitment Fee shall survive the return of the Escrowed Amount to the Investors. The period from the Escrow Deposit Date through and including the earlier of (i) the Closing Date and (ii) the date on which the Escrowed Amount has been returned to Investors pursuant to the preceding sentence being referred to herein as the “Escrow Period”. All interest earned on the Escrowed Amount during the Escrow Period, if any, shall be payable to the Company and may be used in partial payment of the Commitment Fee. | |
Investors:
|
Funds managed by RG Capital Management, L.P. (“RG”) and other institutional investors acceptable to the Company and RG (the “Investors”). |
2
Amount:
|
$12.75 million face amount of 8% Premium Convertible Preferred (the “Preferred”), convertible into Common Stock of the Issuer (the “Stock”) in whole or in part from time to time in accordance with the terms hereof. | |
Conversion Price:
|
The Conversion Price shall equal 115% of the “Closing Price”, where the “Closing Price” is equal to the per share purchase price paid in the Share Purchase. | |
Conversion Ratio:
|
The number of shares of Stock to be received upon conversion of the Preferred will be determined by dividing the “Conversion Amount” by the Conversion Price. The Conversion Amount is the face value of the Preferred submitted for conversion, plus 8% premium accruing on that amount from the issue date through the conversion date. | |
Conversion Restrictions:
|
The Preferred will include a limitation providing that the Issuer will not effect any conversion of the Preferred, and no Investor shall have the right to convert any portion of the Preferred, to the extent that after giving effect to such conversion, the Investor would beneficially own in excess of 4.9% of the Issuer’s Stock outstanding immediately after giving effect to such conversion. | |
Maturity:
|
The Maturity Date shall be the seven-year anniversary of the Closing Date. To the extent not previously converted into Stock, the Preferred will mature on the Maturity Date and at that time the Issuer shall redeem for cash all of the outstanding Preferred for face value plus 8% premium accruing on that amount from the Closing Date through the Maturity Date. | |
Warrants:
|
At closing, the Issuer will issue Warrants to acquire a number of shares of Stock equal to amount invested on the Closing Date, divided by the Conversion Price, multiplied by 75% (the “Warrants”). Each Warrant will have a term of 7 years. The exercise price will equal 120% of the Closing Price. | |
Registration:
|
On or before 30 days from the Closing Date, Issuer will file a Registration Statement covering a sufficient number of shares to satisfy the full conversion of the Preferred and the full exercise of the Warrants. If the Registration Statement is not declared effective within 60 days from the Closing Date, or 120 days in the event of an SEC review, then Issuer will pay the holder 1% of the purchase price of the Preferred for the 1st 30-day period and 2% for each 30-day period thereafter until the Registration Statement is effective. | |
Change of Control:
|
In the event of a Change of Control, including but not limited to (a) the acquisition of voting control or direction over 50% or more of the Issuer’s outstanding Stock or (b) the sale of all or substantially all of the assets of the Issuer, the Investors may require the Issuer to repurchase the Preferred at face value plus accrued premium up to but excluding the Change of Control effective date. Further, upon such repurchase or upon a conversion by the Investor after notice of a Change of Control, the Issuer shall pay to the Investor a make-whole premium equal to the original purchase price of the Preferred multiplied by the following amounts: | |
| 20%, up to 18 months from the Closing Date; | ||
| 15%, from 18 months to 42 months from the Closing Date; | ||
| 10%, from 42 months to 60 months from the Closing Date; | ||
| 5%, from 60 months the Closing Date to the Maturity Date. | ||
Concurrent Offerings:
|
Concurrent with the Preferred closing, Issuer will close the sale of no less than $4.75 million of Common Stock, no more than $30 million of Convertible Notes and no more than $17 million in the form of a Senior Credit Facility upon terms satisfactory to the Company and the Investors. |
3
Covenants:
|
In additional to typical market covenants for similar securities, the Preferred shall include negative covenants restricting Issuer from incurring any obligations which rank senior or pari passu with the Preferred except for the Senior Credit Facility and Convertible Notes contemplated in the Concurrent Offerings. | |
Other Offerings:
|
From the date of the execution of this term sheet until the Closing Date, the Company agrees not to pursue any equity related financing (excluding the Concurrent Offerings) with any other person unless and until good faith negotiations with the Investors have terminated. In addition, Issuer agrees not to pursue any equity related financing (including debt financing with an equity component) without the Investors’ prior written approval during the period beginning on the Closing Date and ending 6 months following the effective date of the Registration Statement. These limitations will be subject to customary exceptions, including underwritten public offerings (other than a continuous offering pursuant to rule 415 under the Securities Act of 1933), strategic investments and acquisitions. | |
Conditions:
|
Mutual agreement on definitive documentation that will be of a customary nature for transactions of this type. Investors’ obligation to execute definitive documentation and fund the Escrowed Amount is subject to satisfactory due diligence in Investors’ sole discretion. No material adverse change in circumstances of the Company prior to funding of the Escrowed Amount. Concurrent, satisfactory funding into escrow of the Concurrent Offerings. |
The Company agrees to reimburse RG for all reasonably incurred out-of-pocket expenses to cover
travel, legal, due diligence, and other costs incurred in connection with the transactions
contemplated hereby regardless of whether the transactions close. Upon execution of this term
sheet, the Company agrees to pay to RG $35,000 as a deposit towards its reimbursement obligations,
which deposit shall be non-refundable to the extent used.
THE COMPANY AGREES TO KEEP THIS TERM SHEET CONFIDENTIAL AND NOT TO DISTRIBUTE IT TO, OR DISCUSS IT
WITH, ANY THIRD PARTY (OTHER THAN THE COMPANY’S LEGAL AND FINANCIAL ADVISORS, WHO SHALL BE INFORMED
OF THE CONFIDENTIAL NATURE OF THIS DOCUMENT) WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF RG.
The parties hereby acknowledge their mutual agreement to the above terms and their intention to
negotiate in good faith definitive transaction documents for the contemplated transaction in an
expedited manner. This term sheet will be considered void if it is not executed by both parties on
or prior to December 30, 2005. The undersigned Company officer, on behalf of the Company,
hereby represents and warrants that this term sheet has been duly authorized, executed and
delivered by the Company. The parties acknowledge and agree that the foregoing term sheet is
nonbinding in nature except with respect to the paragraphs above requiring confidentiality and
reimbursement of RG’s expenses. Except as referred to above, only those rights and obligations that
are set forth in a definitive written agreement, duly executed by all parties to it, will create
any legally binding rights, obligations or consequences with respect to the subject matter of this
document.
| Global Employment Solutions | RG Capital Management, L.P. | |||||
| By: RGC Management Company, LLC | ||||||
By: date:
|
By: | /s/ Xxxxxx X. Xxxxxxxxxx | date: 12/27/05 | |||
| Name: | Name: Xxxxxx X. Xxxxxxxxxx | |||||
| Title: | Title: Managing Director | |||||
4
Attachment 4
Common Stock Term Sheet
(see attached)
December 27, 2005
CONFIDENTIAL
Term Sheet for Global Employment Solutions (the “Company”)
Term Sheet for Global Employment Solutions (the “Company”)
Transaction:
|
The financing contemplated by this Term Sheet (the “Financing”) is being effected in expectation of a reverse-merger “going-public” transaction (the “Transaction”) by the Company. It is contemplated that the Financing will be documented and that the proceeds of the Financing (the “Escrowed Amount”) will be deposited into escrow on or before January 15, 2006 (the actual date on which funds are deposited into escrow being hereinafter referred to as the “Escrow Deposit Date”). The Escrowed Amount shall not be released to the Company until the fulfillment of each of the following conditions (the “Release Conditions”): | |
| (a) the closing of a purchase of not less than 90% of the Company’s equity in a manner and for consideration described more fully in Exhibit A hereto (the “Share Purchase”) by a public “shell” company whose common stock is quoted on a national securities exchange or on the OTC Bulletin Board (or a wholly-owned subsidiary of such entity)(such entity being hereinafter referred to as “PubCo” or the “Issuer”), which entity shall be incorporated in, and in good standing in, the State of Delaware and shall otherwise be satisfactory to RG(as defined herein) in its sole discretion; | ||
| (b) the merger (the “Merger”) of the Company with and into PubCo (or a wholly-owned subsidiary of PubCo) immediately following the Share Purchase, pursuant to which (i) the remaining equity securities of the Company not acquired by PubCo in the Share Purchase will be converted into the same consideration received by those equity security holders of the Company who participated in the Share Purchase and (ii) the shareholders of the Company immediately prior to the Share Purchase and the Merger will own, on a fully-diluted basis following completion of the Share Purchase and the Merger, not less than 97% of the common stock of such surviving entity (or the parent corporation of such surviving entity if the surviving entity is not PubCo); | ||
| (c) delivery to the Investors (as defined herein) of audited financial statements of PubCo prepared in accordance with U.S. GAAP for the periods ended December 28, 2003, January 2, 2005 and January 1, 2006, audited by CBIZ/Xxxxx Xxxxxxx & XxXxxx P.C. or another auditing firm of regionally recognized standing acceptable to RG in its sole discretion, which financial statements (i) shall contain an unqualified opinion of such auditor, (ii) shall reflect pro forma capitalization substantially identical to that set forth on Exhibit B hereto (taking into account the Share Purchase, the Merger and the special dividends and other distributions of proceeds from the Financing and the Concurrent Offerings (as defined herein) expected to be made to the former security holders and current management of the Company in the amounts set forth in Exhibit B hereto (collectively, the “Dividends”)), (iii) fulfill the financial statement requirements for inclusion in both the Current Report on Form 8-K and Registration Statement on Form S I that PubCo will be obligated to file following the consummation of the Share Purchase, (iv) shall be materially in conformity with the financial statements of the Company (audited by Xxxxx Xxxxxxxx) for the periods ended December 28, 2003 and January 2, 2005 previously provided to the Investors (other than any non-material change in the balance of the accrued liability related to the worker’s compensation insurance program in place prior to August 2002, as more fully explained in Notes A and N to the 2004 annual report (a “Worker’s Compensation Adjustment”)), and (v) shall reflect EDITDA (after adjustment for (v) a Worker’s Compensation Adjustment, (w) the annual management fee to KRG Capital Partners, LLC, (x) charges related to employee terminations in the first quarter of 2005, (y) fees and expenses related to the Share Purchase and the transactions contemplated hereby and (z) accounting treatment of the Share Purchase and the transactions contemplated hereby with respect to outstanding management equity plan shares)) for the period ended January 1, 2006 of at least $10,500,000; |
| (d) the extension and modification of the Company’s credit facility with Xxxxx Fargo Business Credit to provide for a credit facility of not less than $15,000,000, on commercially reasonable terms acceptable to RG in its sole discretion; | ||
| (e) each member of management of the Company having entered into non-competition and non-solicitation agreements with the Company and PubCo in form and substance satisfactory to RG in its sole discretion, together with agreements between each such member of management and PubCo providing that PubCo shall not grant demand or piggyback registration rights to any such individual, or otherwise agree to register any securities held by any such individual for resale, for a period of two years from the Closing Date (as defined herein); | ||
| (f) there having not developed, occurred, or come into effect or existence after the Escrow Deposit Date, any change in, or any development involving a prospective change in or affecting, the position of the Company or PubCo, financial or otherwise, that has had, or would be expected to have, a material adverse effect on the Company’s or PubCo’s general affairs, management, financial condition, shareholders’ equity, results of operations or prospects as determined by RG in its sole discretion; and | ||
| (g) there having not developed, occurred or come into effect or existence (i) any suspension or material limitation in trading in securities generally or of PubCo’s shares on the principal stock exchange on which PubCo’s shares are traded (or, if applicable, the trading of Pubco’s shares on the OTC Bulletin Board), (ii) a moratorium on commercial banking activities by either federal or New York State authorities, or (iii) any event, action, state, condition or major financial occurrence of national or international consequence, including any outbreak or escalation of hostilities, act of terrorism, war, national or international emergency, calamity or crisis or like event, or any governmental action, law, regulation, inquiry or other occurrence of any nature which, in the case of any event specified in this clause (iii), in the sole opinion of RG, materially adversely affects or may materially affect the financial markets or the business, operations, affairs or prospects of the Company or PubCo. | ||
Escrow Release:
|
The date on which all of the Release Conditions and all of the other conditions precedent to the Investors’ obligations to close set forth herein have been satisfied, the Escrowed Amount has been released to PubCo, and the Stock and Warrants (each as defined below) shall have been issued and delivered to the Investors shall be hereinafter referred to as the “Closing Date”. Until the Closing Date, or the return of the Escrowed Amount to the Investors as contemplated below, the Investors shall be paid a monthly facility commitment fee (the “Commitment Fee”), regardless of whether or not the Transaction is consummated. The Commitment Fee shall be calculated at an annual rate equal to 8% of the Escrowed Amount, increasing to an annual rate of 12% starting on March 1, 2006, payable monthly in arrears by the fifth business day of each subsequent month and prorated for the actual number of days during the Escrow Period (as defined below). In the event that the Release Conditions are not fulfilled prior to March 31, 2006, the Investors shall have the right to call for the return of the Escrowed Amount to the Investors at any time beginning on or after April 1, 2006, whereupon the obligations of the Investors under the documents contemplated hereby shall terminate and be null and void, except that the Company’s obligation with respect to the payment of the Commitment Fee shall survive the return of the Escrowed Amount to the Investors. The period from the Escrow Deposit Date through and including the earlier of (i) the Closing Date and (ii) the date on which the Escrowed Amount has been returned to Investors pursuant to the preceding sentence being referred to herein as the “Escrow Period”. All interest earned on the Escrowed Amount during the Escrow Period, if any, shall be payable to the Company and may be used in partial payment of the Commitment Fee. | |
Investors:
|
Funds managed by RG Capital Management, L.P. (“RG”) and other institutional investors acceptable to the Company and RG (the “Investors”). |
2
Amount:
|
$4.75 million of Issuer Common Stock (the “Stock”). | |
Purchase Price:
|
The per share purchase price paid for the Stock shall be based on an $80 million Total Enterprise Value and shall equal the “Closing Price”, where the “Closing Price” is equal to the per share purchase price paid in the Share Purchase. | |
Warrants:
|
At closing, the Issuer will issue Warrants to acquire a number of shares of Stock equal to the number of shares of Stock purchased by the Investors on the Closing Date, multiplied by 100% (the “Warrants”). Each Warrant will have a term of 7 years. The exercise price will equal 120% of the Closing Price. | |
Registration:
|
On or before 30 days from the Closing Date, Issuer will file a Registration Statement covering the Stock purchased on the Closing Date and a sufficient number of shares to satisfy the full exercise of the Warrants. If the Registration Statement is not declared effective within 60 days from the Closing Date, or 120 days in the event of an SEC review, then Issuer will pay the holder 1% of the purchase price of the Stock purchased on the Closing Date for the 1st 30-day period and 2% for each 30-day period thereafter until the Registration Statement is effective. | |
Concurrent Offerings: |
Concurrent with the closing of this Financing, Issuer will close the sale of no less than $12.75 million of Preferred Stock, no more than $30 million of Convertible Notes and no more than $17 million in the form of a Senior Credit Facility upon terms satisfactory to the Company and the Investors. | |
Other Offerings: |
From the date of the execution of this term sheet until the Closing Date, the Company agrees not to pursue any equity related financing (excluding the Concurrent Offerings) with any other person unless and until good faith negotiations with the Investors have terminated. In addition, Issuer agrees not to pursue any equity related financing (including debt financing with an equity component) without the Investors’ prior written approval during the period beginning on the Closing Date and ending 6 months following the effective date of the Registration Statement. These limitations will be subject to customary exceptions, including underwritten public offerings (other than a continuous offering pursuant to rule 415 under the Securities Act of 1933), strategic investments and acquisitions. | |
Conditions:
|
Mutual agreement on definitive documentation that will be of a customary nature for transactions of this type. Investors’ obligation to execute definitive documentation and fund the Escrowed Amount is subject to satisfactory due diligence in Investors’ sole discretion. No material adverse change in circumstances of the Company prior to funding of the Escrowed Amount. Concurrent, satisfactory funding into escrow of the Concurrent Offerings. |
The Company agrees to reimburse RG for all reasonably incurred out-of-pocket expenses to cover
travel, legal, due diligence, and other costs incurred in connection with the transactions
contemplated hereby regardless of whether the transactions close. Upon execution of this term
sheet, the Company agrees to pay to RG $15,000 as a deposit towards its reimbursement obligations,
which deposit shall be non-refundable to the extent used.
THE COMPANY AGREES TO KEEP THIS TERM SHEET CONFIDENTIAL AND NOT TO DISTRIBUTE IT TO, OR DISCUSS IT
WITH, ANY THIRD PARTY (OTHER THAN THE COMPANY’S LEGAL AND FINANCIAL ADVISORS, WHO SHALL BE INFORMED
OF THE CONFIDENTIAL NATURE OF THIS DOCUMENT) WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF RG.
3
The parties hereby acknowledge their mutual agreement to the above terms and their intention to
negotiate in good faith definitive transaction documents for the contemplated transaction in an
expedited manner. This term sheet will be considered void if it is not executed by both parties on
or prior to December 30, 2005. The undersigned Company officer, on behalf of the Company,
hereby represents and warrants that this term sheet has been duly authorized, executed and
delivered by the Company. The parties acknowledge and agree that the foregoing term sheet is
nonbinding in nature except with respect to the paragraphs above requiring confidentiality and
reimbursement of RG’s expenses. Except as referred to above, only those rights and obligations that
are set forth in a definitive written agreement, duly executed by all parties to it, will create
any legally binding rights, obligations or consequences with respect to the subject matter of this
document.
| Global Employment Solutions | RG Capital Management, L.P. | |||||||||
| By: RGC Management Company, LLC | ||||||||||
By:
|
date: | By: | /s/ Xxxxxx X. Xxxxxxxxxx | date: 12/27/05 | ||||||
| Name: | Name: Xxxxxx X. Xxxxxxxxxx | |||||||||
| Title: | Title: Managing Director | |||||||||
4
Attachment 5
Xxxxx Fargo Term Sheet
(see attached)
[See
Exhibit K to Exhibit 10.2 to this Form 8-K]
Attachment 6
Plan of Merger
[See Exhibit 2.1 to this Form 8-K]
Exhibit J
Form of Officer’s Certificate
(see attached)
OFFICER’S CERTIFICATE
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
OF
GLOBAL EMPLOYMENT SOLUTIONS, INC.
Pursuant to the provisions of (i) the Preferred Stock Securities Purchase Agreement (the
“Preferred Agreement”), dated as of March ___, 2006, among Global Employment Solutions,
Inc. (“GES”) and the parties listed on the Schedule of Buyers attached thereto, (ii) the
Common Stock Securities Purchase Agreement (the “Common Agreement”), dated as of March
___, 2006, among GES and the parties listed on the Schedule of Buyers attached thereto, and (iii)
the Notes Securities Purchase Agreement (the “Notes Agreement,” and collectively with the
Preferred Agreement and the Common Agreement, the “Agreements”), dated as of March ___,
2006, among GES and the parties listed on the Schedule of Buyers attached thereto, and with the
understanding that capitalized terms used herein and not otherwise defined herein shall have the
meaning assigned to them in the Agreements, the undersigned, in accordance with Section 7(h) of the
Agreements, hereby certifies in his capacity as Chief Executive Officer of GES as follows:
1. Representations and Warranties. Each of the representations and warranties made by
GES in the Agreements, is true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material Adverse Effect, which
are true and correct in all respects) as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a specific date) and
GES has performed, satisfied and complied in all respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or complied with by GES
at or prior to the Closing Date.
IN WITNESS WHEREOF, the undersigned has executed this Officer’s Certificate as of March ___,
2006.
| By: | ||||||
| Xxxxxx Xxxxx | ||||||
| Chief Executive Officer |
Exhibit K
Xxxxx Fargo Term Sheet
(see attached)
CONFIDENTIAL PRELIMINARY TERM SHEET
For Discussion Purposes Only
February 6, 2006
For Discussion Purposes Only
February 6, 2006
Borrower:
|
Global Employment Solutions, Inc. | |
Credit Facilities:
|
$20,000,000 consisting of the following facilities: | |
1) A $15,000,000 committed Revolving Line of Credit maturing
7/31/09. |
||
2) An Overadvance Term Facility of up to $5,000,000, amortizing
over a 36-month period, payable monthly with a balloon payment
due at 24 months for any amount outstanding on the Overadvance
Term Facility at that time. |
||
Purpose:
|
To provide cash to effect reverse merger and provide for the company’s general working capital needs. | |
Collateral:
|
The facility is secured by a first priority security interest in accounts receivable, chattel paper, documents, deposit accounts, unencumbered machinery and equipment, general intangibles, instruments, intellectual property, inventory, investment property, letter-of-credit rights, and all other business assets located in the United States. | |
Borrowing Base:
|
Up to 90% of eligible Billed Accounts Receivable and up to 75% of Eligible Unbilled Accounts Receivable. The Billed and Unbilled Accounts Receivable advance rates will be reduced to 85% and 70%, respectively, immediately upon repayment of the Overadvance Term Facility. | |
Interest Rate:
|
• The interest rate for the Revolving Line of Credit shall be
Xxxxx Fargo’s Prime Rate.
• The interest rate for the Overadvance Term Facility shall be
Xxxxx Fargo’s Prime Rate + 2.75%. |
|
| Default Rate of 3% above rate in effect at time of default. | ||
Minimum Interest Charge:
|
$7,500 per month, payable monthly in arrears. | |
Closing Fee:
|
$175,000 | |
Unused Line Fee:
|
.25% of the unused line amount, payable monthly in arrears. | |
Collateral Audit and
Other Expenses:
|
All costs incurred by WFBC for tri-annual collateral audits which will be billed on an hourly basis per examiner (currently, $100.00 per hour) plus actual out-of-pocket expenses. Collateral exam frequency will be reduced to semi-annually upon repayment of the Overadvance Term Facility. In addition to collateral audits, Borrower will be responsible for any and all reasonable expenses of WFBC, including without limitation, legal and recording fees and expenses, appraisal fees, lockbox and other depository costs, fees for the wiring of advances ($15.00 per |
Term Sheet
| advance), and the costs for any subsequent amendments or documentation. | ||
Termination Fee:
|
2% in year one of the contract term, 1.5% in year two of the contract term and 1% thereafter. | |
Other Fees:
|
$15 Wire Fees $300 Monthly CSI Fee |
|
Minimum Availability Requirement:
|
$2,000,000 at closing and average availability of $2,000,000 on a monthly basis at all times thereafter. | |
Cash Flow Scoop:
|
On an annual basis, WFBC will require that 25% of Excess Cash Flow be used to pay down the overadvance facility. Excess Cash Flow will be defined as after tax net income plus depreciation and amortization, plus deferred income taxes and other non-cash items, minus capital expenditures, minus contractual amortization of long-term debt including capitalized leases and the Overadvance Term Facility as calculated using the audited financial statements. | |
Lockbox Requirement:
|
Borrower will be required to remit its receivable collections to a lockbox located at a bank acceptable to WFBC. Proceeds of the lockbox, including cash receipts and collections received outside of the lockbox, must be deposited daily into a collateral account owned by WFBC. After allowing one day for collection, the funds will be transferred to WFBC for application to the Revolving Credit Facility on a next day basis. Deposits for Southeastern Staffing, Inc. will be excluded from this requirement, but WFBC will retain the right to make this a requirement in its sole discretion. | |
Reporting:
|
1. Weekly reporting of sales, credit memos, and collections.
2. Monthly accounts receivable listing and aging and
certification (to be received electronically as processed by
Collateral Services, Inc.)
3. Monthly accounts payable aging (to be received electronically
as processed by Collateral Services, Inc.)
4. Monthly internally-prepared financial statements with a
certification of compliance with covenants
5. Annual audited financial statements by a CPA acceptable to
WFBC
6. Annual financial projections due 30 days prior to the
beginning of the next fiscal year
7. Other information reasonably requested by WFBC |
|
Conditions Precedent:
|
1. Satisfactory due diligence of the public shell that is being
used to facilitate the reverse merger.
2. Satisfactory subordination/intercreditor agreements with
convertible debt holders. No principal payments will be allowed
on the subordinated debt while the WFBC overadvance exists.
3. No adverse change in the financial condition of the borrower
since the date of the most recent financial statement provided
to WFBC. |
Term Sheet
Covenants:
|
1. Minimum Monthly Net Worth.
2. Minimum Quarterly Net Income.
3. Minimum Quarterly Debt Service Coverage.
4. Maximum Capital Expenditures.
5. All other affirmative and negative covenants typical for this
type of transaction. |
This term sheet is for discussion purposes only and is not a proposal to lend
Term Sheet
Exhibit L
Form of Subordination Agreement
[See Exhibit 10.8 to this Form 8-K]
Exhibit M
Share Purchase Agreement
[See Exhibit 10.1 to this Form 8-K]
Exhibit N
Pro Forma Capitalization and Contingent Liabilities
(see attached)
INDEPENDENT ACCOUNTANTS’ REPORT
ON APPLYING AGREED-UPON PROCEDURES
ON APPLYING AGREED-UPON PROCEDURES
To the Board of Directors and Stockholders
Global Employment Solutions, Inc. and Subsidiaries
Littleton, CO
Global Employment Solutions, Inc. and Subsidiaries
Littleton, CO
We have performed the procedures enumerated below, which were agreed to by Global Employment
Solutions, Inc. and Subsidiaries and Global Holdings, Inc. and R&R Acquisition I, Inc.
(collectively referred to as the “Company”) solely to assist you with respect to the accounting for
the pro-forma capitalization table of Global Employment Solutions, Inc. and Subsidiaries as of
January 1, 2006. The Company’s management is responsible for the Company’s pro-forma
capitalization table.
This agreed-upon procedures engagement was conducted in accordance with attestation standards
established by the American Institute of Certified Public Accountants. The sufficiency of these
procedures is solely the responsibility of those parties specified in the report. Consequently, we
make no representation regarding the sufficiency of the procedures described below either for the
purpose for which this report has been requested or for any other purpose.
Our procedures and findings are as follows
| 1) | Review the pro-forma capitalization table for mathematical errors. | ||
| 2) | Trace the pro-forma adjustments to the legal documents provided to us related to the stock warrants, preferred stock, common stock, subordinated debt and senior debt and verify that all amounts are not materially misstated. | ||
| 3) | Compare amounts reported as common stock, preferred stock, warrant liability, subordinated debt and/or senior debt financing to supporting closing documents relating to each security and/or loan document. | ||
| 4) | For purposes of this pro-forma capitalization and the agreed upon procedures listed on this schedule, materiality is defined as $250,000. | ||
| 5) | Recommend to management any additional adjustments that may be necessary to properly disclose the facts of the proposed share purchase and merger agreement between R&R Acquisition I, Inc., Global Employment Solutions, Inc. and Global Holdings, Inc. | ||
| 6) | Based on the procedures outlined above, the attached Exhibit L “Pro-forma Capitalization Table” appears to be free of mathematical errors and materially reflects the information contained in the legal documents relating the common |
One Boulder Plaza • 0000 00xx Xx., Xxxxx 000
|
0000 X. Xxxxx Xxx., Xxxxx 000 | |
Xxxxxxx, Xxxxxxxx 00000
|
Xxxxxx, Xxxxxxxx 00000 | |
P: 303-444-0471 • F: 000-000-0000
|
P: 720-200-7000 • F: 720-200-7002 | |
xxx.xxx-xx.xxx
|
xxx.xxx-xx.xxx |
| stock, preferred stock, warrants and notes securities purchase agreements provided to us. In addition, we did not recommend to management any material adjustments to disclose the facts of the proposed share purchase and merger agreement between R&R Acquisition I, Inc., Global Employment Solutions, Inc. and Global Holdings, Inc. |
We were not engaged to, and did not conduct an audit on the attached Exhibit L, Proforma
Capitalization, the objective of which would be the expression of an opinion, on the Pro-forma
Capitalization Table of the Company as of January 1, 2006. Accordingly, we do not express such an
opinion. Had we performed additional procedures, other matters might have come to our attention
that would have been reported to you
This report is intended solely for the information and use of the Company and is not intended to be
and should not be used by anyone other than those specified parties.
XXXXX XXXXXXX XxXXXX P.C.
Denver, Colorado
March 31, 2006
Denver, Colorado
March 31, 2006
Global Employment Solutions, Inc. and Subsidiaries
Exhibit L
Pro-forma Capitalization Table
January 1, 2006
Exhibit L
Pro-forma Capitalization Table
January 1, 2006
| Upon Closing | Post Closing Dilution | |||||||||||||||||||||||
| Common Stock | Value per | Value of | Ownership | Common Stock | Ownership | |||||||||||||||||||
| Shares | Share | Shares | Percentage | Shares | Percentage | |||||||||||||||||||
Existing stockholders of Global Employment Solutions, Inc. |
5,000,000.000 | $ | 5.00 | $ | 25,000,000 | 82.91 | % | 5,000,000.00 | 30.43 | % | ||||||||||||||
Existing R&R Acquisition I, Inc. stockholders |
180,927.835 | 5.00 | 904,639 | 3.00 | % | 180,927.835 | 1.10 | % | ||||||||||||||||
New convertible notes |
4,800,000.000 | 29.21 | % | |||||||||||||||||||||
New convertible note warrants |
480,000.000 | 2.92 | % | |||||||||||||||||||||
New convertible preferred stockholders |
2,217,391.304 | 13.49 | % | |||||||||||||||||||||
New convertible preferred stockholder warrants |
1,663,043.478 | 10.12 | % | |||||||||||||||||||||
New common stockholders |
850,000.000 | 5.00 | 4,250,000 | 14.09 | % | 850,000.000 | 5.17 | % | ||||||||||||||||
New common stockholder warrants |
850,000.000 | 5.17 | % | |||||||||||||||||||||
Xxxxxx & Xxxxxxx, LLC (placement agent) |
393,365.000 | 2.39 | % | |||||||||||||||||||||
Total |
6,030,927.835 | $ | 5.00 | $ | 30,154,639 | 100.00 | % | 16,434,727.617 | 100.00 | % | ||||||||||||||
Exhibit O
Form of Non-Competition and Non-Solicitation Agreements
[See Exhibit 10.14 to this Form 8-K]
Exhibit P
Preferred Stock Securities Purchase Agreement
[See Exhibit 10.9 to this Form 8-K]
Exhibit Q
Common Stock Securities Purchase Agreement
[See Exhibit 10.11 to this Form 8-K]
Exhibit R
Form of Joinder Agreement
[See Exhibit 10.3 to this Form 8-K]
Exhibit S
Forms of Pay-Off Letters
(see attached)
[NAME OF NOTE HOLDER]
| Global Employment Solutions, Inc. 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 Xxxxxxxxx, XX 00000 |
March ___, 2006 |
Attn: Xxxxxx Xxxxx
Re: Payment of Subordinated Debt
Dear Xx. Xxxxx:
This letter will confirm that upon receipt of cash and Global Employment Holdings, Inc. common
stock (“Common Stock”) in the aggregate amount of $ , all obligations to
(“ ”) under the
(“ ”), dated as of
, as amended, will be satisfied and cancelled, except for any indemnification obligations
under Section ___ of the that survive the termination or cancellation of the
pursuant to the terms thereof. We acknowledge that the amounts of cash and shares of Common Stock
are determined in accordance with the waterfall under the Master Investment Agreement, dated as of
November 15, 2001, as amended, provided, however, that a minimum of 95% of the aggregate amount
shall consist of cash.
Each of Global Employment Solutions, Inc. (the “Company”) and its affiliates and subsidiaries
(collectively, the “Releasing Parties”) hereby releases, discharges and acquits , its
officers, directors, agents and employees and its and their respective successors and assigns, from
all obligations to each of the Releasing Parties (and its and their respective successors and
assigns) and from any and all claims, demands, debts, accounts, contracts, liabilities, actions and
causes of actions, whether in law or in equity, that each of the Releasing Parties at any time had
or has, or that its or their successors and assigns hereafter can or may have against ,
its officers, directors, agents or employees and its and their respective successors and assigns,
under the .
This letter may be executed in counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument. Facsimile signatures hereto shall be
deemed valid as original signatures.
Sincerely,
| [NAME OF NOTE HOLDER] | ||||
By: |
||||
Name:
|
||||
Title: |
||||
| Acknowledged and Agreed to on March ___, 2006. | ||||
| Global Employment Solutions, Inc. | ||||
By: |
||||
Name:
|
||||
Title: |
||||
[NAME OF NOTE HOLDER]
March ___, 2006
Global Employment Solutions, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Re: Payment of Subordinated Debt
Dear Xx. Xxxxx:
This letter will confirm that upon receipt of cash and Global Employment Holdings, Inc. common
stock (“Common Stock”) in the aggregate amount of $ , all obligations to our firm under
, dated as of
, will be satisfied and cancelled. The amounts of
cash and shares of Common Stock are determined in accordance with the waterfall under the Master
Investment Agreement, dated as of November 15, 2001, as amended, provided, however, that a minimum
of 95% of the aggregate amount shall consist of cash.
This letter may be executed in counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument. Facsimile signatures hereto shall be
deemed valid as original signatures.
Sincerely,
| Sincerely, | ||||||
| [NAME OF NOTE HOLDER] | ||||||
| By: | Acknowledged and Agreed to on March ___, 2006. | |||||
Name:
|
||||||
Title: |
||||||
| Global Employment Solutions, Inc. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[NAME OF NOTE HOLDER]
March ___, 2006
Global Employment Solutions, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Re: Payment of Subordinated Debt
Dear Xx. Xxxxx:
This letter will confirm that upon receipt of cash and Global Employment Holdings, Inc. common
stock (“Common Stock”) in the aggregate amount of $ , all obligations to me under the
, dated as of , will be satisfied and cancelled. The amounts
of cash and shares of Common Stock are determined in accordance with the waterfall under the Master
Investment Agreement, dated as of November 15, 2001, as amended, provided, however, that a minimum
of 95% of the aggregate amount shall consist of cash.
Sincerely,
| [NAME OF NOTE HOLDER] | ||||
| Acknowledged and Agreed to on March ___, 2006. | ||||
| Global Employment Solutions, Inc. | ||||
By: |
||||
Name:
|
||||
Title: |
||||
